What Judges Know: The Fault for Underfunded Pensions Lies With Politicians, Not Workers


(AP Photo/Mel Evans)

Union members carry protest signs as they march outside the Mercer County Criminal Courthouse before arguments Wednesday, June 25, 2014, in Trenton, N.J., over New Jersey Gov. Chris Christie's plan to use pension payments to balance the budget. Public employee unions on Wednesday tell the court the current budget has unspent funds that could go toward pensions. 

Advocates of gutting public pensions are running into the same wall over and over again.

From California to Illinois to New Jersey and beyond, pension gutting efforts are being overturned by judges who recognize that breaking promises to workers isn’t just regrettable, it’s illegal. Pension opponents castigate the courts as the enemy while conveniently ignoring why legal protections exist in the first place—to protect public employees from politicians who spent years playing politics with their retirement savings.

For decades, elected officials across the country skipped pension payments, often while funneling money into pet projects. Until the Great Recession, politicians were able to hide these mistakes behind a booming economy. But by 2008 the economy had plummeted, shining the spotlight on this financial malfeasance.

When the average American faces a debt problem of their own making, they have to make tough choices and figure out a way to pay back their creditors. Politicians, however, are taking the opposite approach – fixing their mistakes by gutting worker benefits.

If that sounds unfair, that’s because it is. Workers did not create pension funding problems. In fact, the vast majority of employees contribute a portion of each paycheck toward their retirement.

But thankfully, forty-eight states have some kind of legal protections on the books for public employee pension benefits. That means that 96 percent of states believe that the workers’ rights are worth protecting. Those protections aren’t easily breakable.

The story is playing out in a big way in Illinois. Last month, the Illinois Supreme Court handed down a ruling strongly indicating that the pension-reduction package passed by the Legislature in 2013 will eventually be deemed unconstitutional.

Illinois’ pension funds have problems, but they weren’t caused by public workers. According to Chicago’s WBEZ, “the state, led by governors and General Assembly members, has never really paid its fair share.” Pension actuaries—the folks who study pension funding—have been sounding the alarm about government underfunding in Illinois since 1945. Seventy percent of the state’s pension debt growth between 1985 and 2007 was due to the government’s failure to make payments.

Illinois workers earn an average of $32,000 in retirement per year, and pay an average of eight to nine percent of every paycheck toward their pension. Four of every five public workers are not eligible for Social Security.

Despite protests from pension opponents, the Illinois courts are doing what they are supposed to do—protecting public workers whose rights are guarded by the state constitution.

A similar storyline unfolded in San Jose. As pension lawyer and expert Teague Paterson explained: “Mayor Chuck Reed pushed a legally dubious ‘Measure B,’ which would have cut the pensions of city employees who couldn't contribute a whopping additional 16 percent of their salary towardretirement. Judge Patricia Lucas rejected the initiative, tentatively declaring that as part of employee contracts, retirement benefits are protected by the state constitution and therefore, the whims of politicians.”

And then there is New Jersey. By executive order, New Jersey Governor Chris Christie recently cut payments to the state pension system by $2.6 billion. Ironically, Christie is using his own cuts to the system to advocate for a new round of (unspecified) cuts for public employees, over and above cuts he already forced in 2011.

Portions of the 2011 cuts, however, have been found unconstitutional. In June, the State Court of Appeals ruled that Christie’s efforts to freeze cost of living adjustments—better known as COLAs—violated worker’s contract right to yearly increases in their pension benefits, which are part of the state’s benefits package.

A pension works like a contract. Most public employees don’t make as much as their counterparts in the private sector, but in return are guaranteed a modest, but secure retirement. It’s deferred compensation for a lifetime of public service. For states to cut benefits is like promising your neighbor’s kid $20 to mow the grass, but wind up only paying him $12 because you went out to buy a six-pack.

Rather than finding ways to circumvent laws and spend millions of taxpayer dollars defending illegal “reform” packages in court, legislators in Illinois, New Jersey, California and states around the country should be looking at ways to strengthen and preserve retirement systems for generations of public employees to come. We can’t count on politicians to stick to their word. It’s promising that judges are forcing them to.


I have written to the CWA and governor asking: "What would the pension fund balance be today if the state had made all required payments to the fund like I was forced to.

No response yet. I am not holding my breath.

The article claims: "Most public employees don’t make as much as their counterparts in the private sector, but in return are guaranteed a modest, but secure retirement."
I would like to see evidence of this assertion.

There's a simple way to guarantee this never happens again. Simply have an amendment to each state's constitution making the legislature and/or the governor personally responsible for making up any missed payments. Anyone refusing to abide by this would be removed from office on fraud charges. Bet that pensions would be at the top of every state and municipality's funding list every year.

This article only tells one side of the story. Another way of characterizing government pensions is that public sector unions bought some politicians through massive campaign contributions. These politicians decided that the best way to repay their union supporters was to grant generous pensions. Unlike offering wage increases, this idea has the benefit of not having any effect on the public coffers until well after the paid-for politician leaves office.

Now, the taxpayer is left with declining services, strained budgets, high taxes, and pissed-off public workers. I'm all for public sector workers making a decent living, but their has to a limit on future compensation that the govt. is allowed to agree to. Public sector workers should be forced to give up guaranteed pensions for higher wages in the present, so we don't have this time bomb.

The public sector could have fewer, but more qualified employees (like Singapore) who would be expected to manage their own retirement.

You focused on the future aspect of the story. Fact is, the pensions CURRENTLY in force represent a promise made to these employees. Remember also, these employees are not allowed to contribute to Social Security and Medicare (the reason for which escapes me; I will receive a pension when I retire, yet, I have to contribute to Social Security and medicare.) would you like to see more people on government assistance? Remember also that if politicians weren't using public pensions as piggy banks for pet projects, we wouldn't be having this conversation. You choose to mostly vilify the employees, while mostly giving the politicians a free pass.

Private sector workers in America are also expected to "manage their own retirement", but that hasn't worked out too well. Most private sector employees can't afford to retire, so I guess they work till they die or get fired. Maybe they make more money in Singapore.

While this article is 1000% spot-on. Unfortunately, the people that need to be educated of these facts will not take the time to educate themselves. They will just listen to the political rhetoric spewed by the lying politicians. Maybe it will take a buffoon like Chris Christie to get in the white house and start underfunding Social Security for anyone other than public employees to pay attention. Very Sad state of affairs.

It requires a complete suspension of disbelief to be shocked that politicians tell voters what they want to hear. Government workers do not have the right to destroy their state by extracting wealth from their grandchildren. Chicago can go ahead and treble their taxes to pay their pension obligations. Their citizens will flee and create another detroit. FICA was created to prevent abject poverty in the elderly, not to provide a full retirement. Plan accordingly, or face the consequences. You are responsible for your retirement. It's called an IRA. Get one and fund it. Stop taking blank check pension promises, start saving responsibly.

You missed a point I made, and that the writer also made. Public employees are not allowed to pay into Social Security and Medicare as the rest of us do. Without this, and a pension, where, exactly do you suggest they find the money to save for retirement? Most of us use the combination of the two to fund retirement. If public employees are unable to contribute to Social Security, do you seriously believe they can save enough on their own to fund retirement? It takes a lot of years, and an equal amount of cash to make an IRA pay out enough to retire. Tell a public employee making 40-50K per year that they need to pay into an IRA enough to retire on without Social Security.

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