In an attempt to alleviate looming budget crises, states are making serious pension-benefit cuts.
Unfortunately, nearly all of the cuts so far apply only to workers not yet hired, and phase in so slowly they are unlikely to save the weakest funds.
“We’re within a few years of having some of the pension funds run out of money,” R. Eden Martin, president of the Commercial Club of Chicago, a business group that has been warning of a “financial implosion” for several years, told the New York Times.
“Funding for the schools is going to be cut radically. Funding for Medicaid. As these things all mount up, there’s going to be a lot of outrage.”
In order to avoid legal battles with unions, most states are allowing most public workers across the country to continue building their pensions at the same rate.
Earlier this year, pension funds in Colorado and Minnesota curtailed annual cost-of-living increases. Colorado imposed cuts on its current workers, not just future hires, and even on some workers who have already retired — and those cuts take effect immediately.
"No matter how Draconian you got on the new hires, you ran out of money" unless benefits to current retirees are cut, Meredith Williams, chief executive of the Colorado Public Employees' Retirement Association, told the Wall Street Journal.
Both states are being sued by retirees who claim the changes violate state law.
Those retirees have "lived up to their end of the bargain, and the state is not living up to theirs," says Stephen Pincus, a Pittsburgh lawyer representing plaintiffs in both states.
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