By: Mark Glennon*
The California press is now full of praise for serious pension reform championed by none other than “Governor Moonbeam,” Democrat Jerry Brown.
Now in his last year as governor, Brown is taking on public unions by arguing their pension rights are limited to “a ‘reasonable’ pension — not an immutable entitlement to the most optimal formula of calculating the pension.” He wants benefits cut.
Meanwhile, Illinois continues to fool itself with fake pension reform.
Most recently, along with the new budget passed in July, the state passed “Tier 3” reforms that promised $500 million per year in taxpayer savings. That’s baloney. The more I’ve dug into it the less savings I see, and I wouldn’t be surprised if the changes won’t save a dime.
That’s because Tier 2 overcharged its members to help reduce the deficiencies in the rest of the system, which all derive from work already performed by Tier 1s. Under the new law, most Tier 2s will switch into Tier 3 and that subsidy will end. That’s a good and fair result for Tier 2s but it worsens unfunded liabilities. We’ll have to wait for professional, actuarial analysis to confirm if I am right, but that’s my prediction.
An interesting historical tidbit: That “Governor Moonbeam” label for Jerry Brown was originated by Chicago’s own Mike Royko over 40 years ago! Here’s NYT’s story on that.
*Mark Glennon is founder and Executive Editor of Wirepoints. Opinions expressed are his own.
Expect no retraction or apology. This what they do.
The state’s existing buyout program for its own pensions is the precedent for Chicago, which should be a warning: Look out for similar exaggerated claims and shoddy analysis.
Even a favorable decision by the supreme court would not resolve the fiscal problem — unless there were some way to make it retroactive. But it’s unlikely that spent money will ever be recovered. Perhaps benefits not yet paid could be cut back, but it seems to me that bankruptcy will still be necessary to marshall limited assets and restore public services.