What Ted Kulongoski is doing in Oregon (see yesterday's links) is interesting for a number of reasons. His newest recommended cuts to public employee pensions are part of the latest proposals of his so-called Reset Cabinet, which Kulongoski created to help 'reset' Oregon fiscal policy. His idea was that this deep downturn has produced more than just some brief fiscal pain. Instead, the downturn exposed long-term structural imbalances between spending and revenues which can only be remedied by extensively revamping government, not merely by cutting and pasting together a budget.
This notice of 'reset' is growing among governors. In Feb., in fact, the National Governors Association Center for Best Practices produced a report entitled The Big Reset: State Government After the Big Recession which acknowledges the role that employee pension and benefits costs are playing in the long-term budget problems many states face. "Salaries and benefits for state employees--together with unfunded liabilities related to state retiree health care and pensions--represent a substantial cost to states," that report notes. " Moreover, it is a cost that is growing at a rate that cannot be sustained. To have any hope of achieving fiscal health in the future, states will need to redesign their benefit systems."
Several other states, notably, Georgia, Michigan and Vermont have already produced their own version of 'reset' reports aimed at stabilizing budgets under the 'new normal' we're now facing. It will be interesting to see the degree to which elected officials in these states can muster the political will to enact these changes.
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