Jerry Brown, pension reform hero?

Last updated on: November 26, 2017 at 10:08 am by Jane the Actuary

Jerry Brown, pension reform hero? 2017-11-26T10:08:41-06:00 Jane the Actuary

LOGO Patheos Explore the world's faith through different perspectives on religion and spirituality! Patheos has the views of the prevalent religions and spiritualities of the world.

Here’s the background:

Back in 2015, the Illinois State Supreme Court ruled that a 2013 public pension reform, which attempted to reduce pension benefits for existing employees by

stopp[ing] automatic, compounded yearly cost-of-living increases for retirees, extend[ing] retirement ages for current state workers and limit[ing] the amount of salary used to calculate pension benefits.

was unconstitutional because our state constitution prohibits any reduction in benefits, not just for existing benefits, but for any benefits that would ever be earned in the future, for existing employees. Even if you were hired yesterday, the state is obliged to continue providing the same generous benefits until you reach (a very early) retirement age.

And — this was as close as I ever came to “appearing in the paper” — Bloomberg columnist extraordinaire Megan McArdle mentioned my blog post in her own piece, “Save the Pensions: No Sudden Moves, Please,” which is, annoyingly now under a nearly-impassable paywall (are you a Bloomberg Professional Service Subscriber? I thought not), and, in the version of the article which appears in syndicated form (e.g., here) this snippet of her article was reworded, “Jane the Actuary, a frequent commenter on the religion website Patheos.com” and the link to my blog post removed (which makes sense, I guess, if published in actual newspapers).

Anyway, the original version is excerpted here, though without the link, or even the phrasing I had remembered (“a frequent commenter here and a blogger at Patheos.com”):

But Jane the Actuary, a frequent commenter here, argues that what should actually be at stake is not benefits that have already been accrued for past work, but those that will be earned in exchange for future work. Private employers are not allowed to take back benefits you already earned, and governments shouldn’t do this either. But private employers can tell you that the pension fund is closed and you won’t accrue any further benefits, or that benefits accrued in the future will be smaller. Should governments be able to do this too?

Now, McArdle goes on to say that a midcareer worker would be unfairly penalized by the elimination of future accruals, since traditional pensions are a very backloaded way of acquiring retirement benefits (that is, since the benefits disproportionately accrue as you get older due to the nature of the formulas), which makes the loss of those anticipated future accruals difficult to make up for simply by increasing savings. And she’s not wrong, but there’s still a lot of room for reform even if future accruals for midcareer workers are preserved — there’s no reason that younger workers should keep their future-accrual guarantee, or that the generous early retirement provisions should be maintained (I’m sorry, but it doesn’t harm you if you have to work more years than you initially thought), or that benefit provisions should lead to eye-poppingly generous retirement benefits, well in excess of what private sector retirees would end up with even knowing from the start that personal savings are needed.

So, while that’s been a dead issue in Illinois (much as I would wish otherwise), I was heartened to read a report from Legal Insurrection the other day, that Governor Jerry Brown in California is actually proposing to make such a switch. They cite the Sacramento Bee, which reports

Gov. Jerry Brown got most of what he wanted when he carried a proposal to shore up the state’s underfunded public employee pension plans by trimming benefits for new workers.

Five years later, he’s in court making an expansive case that government agencies should be able to adjust pension benefits for current workers, too.

A new brief his office filed in a union-backed challenge to Brown’s 2012 pension reform law argues that faith in government hinges in part on responsible management of retirement plans for public workers.

Now, whether Brown has a chance in hell of getting court rulings in his favor is beyond my expertise, but it’s at least promising that he’s engaging in this conversation.

In Illinois, it’s clear to me that what’s needed is a constitutional amendment, or, rather, a repeal of the provision guaranteeing future accruals for state workers. Unfortunately, it’s also clear to me that, with Michael Madigan in power and beholden to the public unions, and with extensive barriers to voting on amendments via petition-gathering to place them on the ballot, that won’t happen anytime soon.

Image: http://www.navair.navy.mil/index.cfm?fuseaction=home.NAVAIRNewsStory&id=4801

Uncategorized

Illinois

public pensions

Previous Post

November 22, 2017

A few comments on the German elections (or, What to talk about tomorrow that's not Trump)

Next Post

November 27, 2017 The anti-Democratic CFPB

Browse Our Archives

Select a Category Actuarial/Retirement Issues Politics Uncategorized

Select a Month September 2026 August 2026 July 2026 June 2026 April 2026 March 2026 February 2026 January 2026 December 2025 November 2025 October 2025 July 2025 June 2025 May 2025 April 2025 March 2025 February 2025 January 2025 December 2024 November 2024 October 2024 September 2024 August 2024 July 2024 June 2024 May 2024 April 2024 March 2024 February 2024 December 2023 November 2023 October 2023 September 2023 August 2023 July 2023 December 2022 September 2022 August 2022 July 2022 June 2022 May 2022 February 2022 January 2022 December 2021 August 2021 June 2021 April 2021 February 2021 January 2021 December 2020 November 2020 October 2020 September 2020 August 2020 July 2020 June 2020 May 2020 April 2020 March 2020 February 2020 January 2020 December 2019 November 2019 October 2019 September 2019 August 2019 July 2019 June 2019 May 2019 April 2019 March 2019 February 2019 January 2019 December 2018 November 2018 October 2018 September 2018 August 2018 July 2018 June 2018 May 2018 April 2018 March 2018 February 2018 January 2018 December 2017 November 2017 October 2017 September 2017 August 2017 July 2017 June 2017 May 2017 April 2017 March 2017 February 2017 January 2017 December 2016 November 2016 October 2016 September 2016 August 2016 July 2016 June 2016 May 2016 April 2016 March 2016 February 2016 January 2016 December 2015 November 2015 October 2015 September 2015 August 2015 July 2015 June 2015 May 2015 April 2015 March 2015 February 2015 January 2015 December 2014 November 2014 October 2014 September 2014 August 2014 July 2014 June 2014 May 2014 April 2014 March 2014 February 2014 January 2014 December 2013 November 2013 October 2013 September 2013 August 2013 July 2013

TAKE THE

Religious Wisdom Quiz

How many disciples did Jesus have?

Select your answer to see how you score.

Seven Ten Twenty Twelve