State and local politicians across the country have backed a variety of (usually disappointing) measures supposedly designed to fix the problems of their public pension funds. Rick Dreyfuss does us all the favor of separating "pseudo reform" from the real thing in his new report for the Manhattan Institute.
"Fixing the Public Sector Pension Problem: The (True) Path to Real Reform" is an invaluable guide for anyone trying to disentangle the truth from the hype about "pension reform" -- a phrase which, experience suggests, should always appear within quotes.
This table from the report sums up downside of ideas that will sound all too familiar to veterans of the pension wars:
After explaining the shortcomings of common (alleged) pension fixes, Dreyfuss explains what real reform looks like:
The entire report is well worth the read -- a keeper for the pension-obsessed, in and out of government.
Switching to DC Plans is the BEST of the reform options ... as long as it includes CURRENT as well as new workers.
Such a switch almost always leaves us to deal with the unfunded liabilities associated with the now-closed DB Plan. I'm guessing that's why your #3 under "A Five-POINT Plan for Comprehensive Reform" is a bit confusing ..... all but the 2-nd bullet under #3 reasonably deals with these Prior Plan promises, while the 2-nd bullet (a 4-7% of payroll cost suggests it is applying to the new DC Plan). And as an aside, that 4-7% DC Plan cost will provide for a retirement that, while comparable to that offered Private Sector workers by their employers, is about 25% as generous as the current Public Sector DB Plans. The Public Sector Unions/workers (greedy as they are) aren't going to like that one bit
Unfortunately, the meat ... specific suggestions as to how to deal with the unfunded closed DB Plan liabilities is not offered. Not surprising as there a no options other than reductions in the promised benefits and/or tax increases...... keeping in mind that "projecting" big investment gain is NOT a real solution.
Legalized robbery.