One of the thorniest issues that states and municipalities have faced as
they seek to limit spiraling pension debt for government workers is
the issue of just how much of their retirement plans they can change. A researcher at the Federal Reserve Bank of Cleveland has contributed a valuable summation of state laws,
which depressingly shows that the majority of states have over the
years placed into legislation protections not just on past benefits that
workers have already earned through their service, but on any future
accruals for those already working for a state or its municipalities. This, union leaders contend, makes it impossible to alter a
pension plan for any worker already in the system, so that he can
continue earning benefits at the highest level possible for the rest of
his career. Of course, there is legal wiggle room. Courts have, for instance, declared portions of pension benefits, such as cost-of-living adjustments, as outside the law, allowing states to alter these benefits. But it seems likely we'll see plenty of court cases as the courts try to define just what constitutes acceptable change under the law.
Thanks for the post and link. Financial reality and public opinion, however, and not current law, will dictate. The laws will just have to be changed. What's impossible (paying all those exorbitant benefits) will not happen. Here in Illinois the current General Assembly can't bind a future General Assembly, but some would argue that a locally agreed to sweet deal contract can bind unborn taxpayers. That's silly. Fortunately even some big law firms are taking a closer look - see http://civiccommittee.org/initiatives/StateFinance/Guarantor_issue_Sidley_6_8_10.pdf.