6 New Governors Seek to Kill Defined Benefit Plans; 8 of 9 CA Cities Vote to Reduce Benefits; Fraudulent Promises (and what to do about them)

Defined benefit pension plans are in trouble across the country, but politicians in states like Arizona and Illinois are reluctant to tackle the problem. Voters across the country however, have taken matters into their own hands by refusing to agree to tax hikes and by voting to reduce benefits.

In California, voters in eight of nine cities or counties approved measures to reduce public-pension benefits. Moreover, six new governor-elects want to kill defined benefit plans.

Finally, the speaker of the House in Arizona wants a constitutional amendment to lower pension benefits.

Arizona Central covers these issues and more in a pair of articles. Let's start with a look at Pension reform a difficult task.

The Arizona Legislature's incoming House speaker and Senate president said lawmakers can go only so far to slow the rate of growth for the state's pension systems, which an Arizona Republic analysis found cost taxpayers $1.39 billion last year, a 448 percent increase from a decade ago.

These rising taxpayer costs, coming at a time when state and local governments have cut services to balance their budgets, have been driven in part by the pension trusts' investment losses during the market downturn but also by ongoing pension-benefit improvements and efforts to hold down costs for employees themselves.

"It's time we get serious about reforming the public-pension systems," said House Speaker Kirk Adams, R-Mesa. "But if we are going to have any fundamental change, the voters will have to get involved."

Adams said he would work to get the Legislature to have voters in 2012 change the state Constitution, which prohibits benefits from being diminished for those in the public-pension systems. Adams said he has yet to get support from the Republican-controlled Senate or Gov. Jan Brewer, a fellow Republican.

In 1998, the intent of the measure was to protect public-pension trust funds, which had surpluses at the time, from being raided by lawmakers in the event of lean budget times. Since then, the pensions have not been touched by lawmakers.

In a significant indication of change, six newly elected governors in Alabama, Nevada, Pennsylvania, Tennessee, Wisconsin and Rhode Island have suggested that they want to amend their states' pension systems to 401(k) plans similar to the private sector's, said Stephen Fehr, a pension expert for the Pew Center on the States. The center is a non-profit policy-advocating group.

"They want to shift away from guaranteed pensions," Fehr said.

Even in states with strong labor unions, such as California and Illinois, action has been taken, Fehr noted.

Voters in eight of nine California cities and counties approved measures during the recent election to cut public-pension benefits. In addition, Fehr said, more than 40 suburban communities in Chicago approved a ballot question that called on the Illinois Legislature to reduce benefits for future state workers.

Arizona House Speaker Kirk Adams Proposes Constitutional Amendment

There is much more in the article, please give it a look. Also consider House speaker unveils sweeping plans

Adams plans next session to ask lawmakers to:

- Eliminate the Deferred Retirement Option Plan for public-safety officers. This program costs tens of millions of dollars, providing lump-sum payments to police and firefighters who agree to defer retirement for up to five years and stay on the job.

- Prohibit public employees from retiring and returning to work. The practice of "double-dipping" reduces contributions to the pension systems by millions of dollars.

- Prohibit public officials convicted of crimes related to official duties from receiving pensions.

- Eliminate the pension system for elected officials and move judges who are in that plan into the larger Arizona State Retirement System. Pensions for elected officials are the best in the state.

- Change the state's pension plans, which have guaranteed payouts, to 401(k)-type systems.

- Refer a constitutional amendment to voters in 2012 to allow pension benefits to be reduced. A provision in the Arizona Constitution prohibits benefits from being diminished.

Fraudulent Promises Need Not Be Kept

Many will say we cannot renege on promises. The reality is those promises are invalid because they came about as a result of fraud. Politicians got into bed with public unions by making promises they knew they could not keep, in return for endorsements from unions to get elected.

The entire vote-buying process by unions is fraudulent. No one represented taxpayers, even though public workers are supposed to be public servants.

It is not at all wrong to take away promises made via fraudulent vote buying, influence peddling, and bribes. The same applies to public union wages as well.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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