One problem with achieving state and local pension reform, as I explained in this Wall St. Journal piece, is that legislators often have a big stake in the retirement system that they are being asked to reform. One place where that has long been true is Arizona, where legislators' own pension system is even more generous than that of rank and file employees. One result has been that the elected officials pension fund is the state's worst-funded. But now reformers are looking to change that.
A new plan would end the elected officials' defined benefit plan in the state and provide all new legislators with a defined contribution pension. The aim is to cut the public's contributions to legislators pensions, which have grown exponentially. A decade ago taxpayers contributed $3.75 million to the fund, while legislators themselves kicked in $4.3 million. But thanks to deteriorating funding levels, last year the public paid $21.7 million into the system, compared to $6.8 million contributed by elected officials.
Of course, Arizona has tried this reform before, to no avail. I can't imagine why it's failed in the past.
Of course, Arizona has tried this reform before, to no avail. I can't imagine why it's failed in the past.
Part of the problem with the proposed Arizona reform is that the elected officials' pension plan also includes judges. Generally, these are career professionals who have forgone much higher pay in the private sector in exchange for the various benefits of serving as a judge.
Attracting and retaining qualified attorneys to serve as judges, when the pay is often lower, can be even more difficult when there's not a pension that encourages the judges to stay on the job. A defined contribution plan creates little to no incentive to stay on the job, and no one is well-served when a qualified judge vacates a position to work in private practice.
With respect to a pension benefit, it is entirely reasonable to distinguish between judges and state legislators, particularly when the latter are term-limited, as they are in Arizona. Let's hope the Arizona Legislature considers such issues when enacting pension reform.
Could Mr. Malanga please explain the methodology and source of the chart in this post?
Hello. In a prior comment, I requested that Mr. Malanga explain the chart above. I now see that he explained it in a prior post that is linked from this one, so please disregard that comment, and I apologize for the trouble. Thank you.