1. Leaders in the Arizona legislature are likely to put pension reform near the top of the agenda for the upcoming legislative session. They are talking about increasing employee contribution rates, putting restrictions on "double-dipping," and abolishing the pension plan for state legislators altogether. It is also possible they will propose an amendment to eliminate Arizona's constitutional guarantee of pension benefits; pensions enjoy constitutional protection only in some states. Unfortunately, there's no mention of a shift to defined-contribution pensions. (Arizona Republic)
2. The Republican leader in the Illinois House of Representatives is also putting forward a pension reform plan that looks, at first glance, quite similar to a good one that was recently enacted in Utah. Essentially, employees could choose between a defined contribution retirement plan with an employer match, or a modified defined benefit plan. One key advantage of this proposal is that it wouldn't just apply to new employees--it would also apply to new pension accruals by existing employees.
However, the devil is in the details--to ensure that taxpayers are shielded from undue risk, the new defined benefit option should have "hybrid" characteristics that ensure unusual investment losses (and gains) are borne by workers and retirees, not taxpayers. (Or, ideally, employees should be limited to a defined-contribution option.) If any state needs pension reform, it's Illinois, so I hope that the Democrats who hold the legislative majority also take up this cause. (Chicago Tribune)
3. I have a column today that looks at Midwest state governments that will be under new all-Republican control in January. Their governors-elect (or, in the case of Indiana, sitting governor) are talking a lot like Chris Christie about how they intend to approach public employee unions. (RealClearMarkets)
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