As states and cities confront huge liabilities in their pension funds, one subject getting more discussion around the country is whether governments can legally change their pension promises for workers already in the system, especially in states like Illinois and New York where laws prohibit such changes. Illinois' constitution, for instance, actually says that worker pensions "shall not be diminished or impaired."
Rep. Jack Franks has introduced legislation that would extend to all current state workers the same pension revisions passed last year for new government workers. That law caps the maximum annual salary at which a worker's pension can be calculated at $106,000 and raises the state's retirement age to 67, from 60. As Franks said when he introduced the bill, anticipating a court fight if it passes, "We're going to find out if it's constitutional or not."
Meanwhile, earlier this month San Diego City Attorney Jan Goldman released an opinion that says the city can limit the size of future pensions even for current workers by freezing the base salary upon which pensions are calculated. If implemented, the plan outlined by Goldman would allow workers to get pay raises, but they would no longer be counted toward the pay that is used to figure final pension benefits.
And a March date has been set for a court case in Minnesota where retirees are challenging a law enacted law year that eliminates their annual cost-of-living adjustments if the state's pension funds are less than 90 percent funded. Similar lawsuits are also pending over reductions in benefits for current retirees in Colorado and South Dakota.