Reforming Public Pensions
68 Pages Posted: 4 Apr 2014 Last revised: 24 Apr 2020
Date Written: April 2, 2014
Pension reform has taken center stage in the public policy debate as states struggle to deal with the fallout from the Great Recession. The public pension debt crisis jeopardizes the fiscal solvency of states as well as the nation’s long-term financial health. Retirement benefits are also a critical component of income-maintenance for public retirees. In this article, we integrate and extend the pension reform movements in law, education and economics by studying teacher pensions across the United States. Our interdisciplinary approach concentrates on defined benefit plans in states that do not contribute to Social Security. Focusing on this vulnerable and important group of government workers, we aim to improve theory and practice by providing a valuable perspective as states reconsider their pension obligations.
We initially estimate the severity of the public pension problem through statistical analyses and comparisons among fifty state plans. We then evaluate the legality and desirability of existing and proposed reforms. Significantly, pension reform raises new constitutional questions that are challenging courts to arrive at an acceptable conceptual framework for consistent interpretation and application. With the foregoing financial, political, and legal considerations in mind, we suggest a comprehensive set of reform measures along with a managerial paradigm for political action. The policymaking methodology directs attention not only to the pension plans themselves, but also to the political reality of their creation and continued operation. We conclude that a comprehensive response to the public pension crisis is necessary to avert disaster and maintain plan solvency both now and in the future.
Keywords: public pensions, retirement security, government pensions, defined benefit plans, teacher pensions, educator pensions, state pensions in non-social security states
JEL Classification: H72, H75, K30, K31, J26
Suggested Citation: Suggested Citation