Yep, the private sector has reduced its financial pain by kicking as many people as possible out of pension plans at it can. Now, it appears that public sector will get its turn, albeit through different methods.
Take, for example, Illinois, where state lawmakers reduced workers' contributions to pensions and at the same time cut their benefits in a 30-year plan to erase a $100 billion retirement-account deficit.
And in Detroit, a judge signed off a plan to cut pensions as part of the solution to the largest and ugliest municipal bankruptcy in the history of this wonderful country. That determination is a gut punch to thousands of retirees who believed in their state's constitution.
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The reaction? Sure advocacy groups stomped and growled. But perhaps the more telling reaction comes from, as you might expect, the money guys. As in, follow the money.
One needs look no further than Wall Street. Early signs indicate at least some are just fine with this plan to ease municipal financial pain. No less a major credit-rating house than Standard & Poor's has smiled more beneficently on Illinois debt than it has in years after the pension reform move.
On Tuesday, the bond rating company continued its A- rating on Illinois' debt but revised its outlook to "developing" from "negative."
That means, says Standard and Poor's, that the rating could be raised or lowered in the next two years. One of its analysts, Robin Prunty, called the change good but said that there's still risk in the picture because unions most likely will sue over the pension change that Gov. Pat Quinn signed.
Sadly, there's more evidence mounting against maintaining funding for state pensions. State Budget Solutions, a nonpartisan, nonprofit public policy organization, estimates that unfunded state pension liabilities total $4.1 trillion and slip under the radar because they're counted as future payments.
Not surprisingly, other states have been getting their ducks in a row. Gina Raimondo, Rhode Island treasurer and a former Rhodes Scholar, two years ago decided to wage some major whoop ass against state workers and their public pensions. She was among the legislators behind the Rhode Island Retirement Security Act of 2011. I guess it's no surprise she came from the private financial sector; she was co-founder and general partner of Point Judith Capital, a venture capital firm.
Reforms, however, are not without risks.
When confronting the possibility of swapping out its pension plan for a 401(k) program, Minnesota turned to actuaries who said a move like that would do damage to taxpayers to the tune of $3 billion, similar to other studies about states like Nevada, New Mexico, Missouri and Kansas, said the website OurFuture.org.
There are two sides to each story. Some don't mind cutting pensions to cover costs. Others do. I'm among those who find the cuts appalling. If you are promised money at the end of your career for your years of toil, that promise should be kept, especially if your government promised it to you.
While the politicians haven't delivered any knockout punches thus far to the U.S. public pension system, they've certainly managed to land more than a handful of painful blows.
There must be a better way.
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