It seems like every day brings a new story about how states across the country are struggling with public employee pension and health care benefit costs. In Ohio the issue is at the forefront due to the upcoming vote on Issue 2, and I’ve written about the huge challenges confronting Rhode Island and Illinois.
Now California — which may have the biggest problem of all — is trying to work through the issues. On Thursday Governor Jerry Brown declared California’s current system unsustainable and unveiled an approach that tries to deal with the inevitable effects of demographics. Brown, a Democrat, proposes raising the retirement age for most government workers from 55 to 67, increasing employee contributions to 50 percent of pension costs, and moving the state’s system from a complete defined benefits program to one that includes a 401(k) component, where employee benefits depend on their contributions and the performance of investments they have selected. He also proposes reforms to ensure that pensions are based on regular salaries, not on bonuses or overtime. Public employee unions have been critical, arguing that they have recently given concessions and that any changes to benefits should be the product of collective bargaining.
From sea to shining sea, the handwriting is on the wall: states and local governments eventually must grapple with meaningful reforms to budget-busting public employee pension and benefit costs. The Ohio General Assembly attempted to do that with the legislation that is the subject of Issue 2. If Ohio voters reject Issue 2 come Election Day, the issue is not going to go away. Why not tackle it now?