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Washington, D.C. — State pension obligations have been called a ticking time bomb. According to the Pew Center on the States, unfunded state pension obligations total more than $1 trillion and exceed thousands of dollars per resident in many states.
Today, Education Sector releases a new look at the legal landscape surrounding state pension reforms. A Legal Guide to State Pension Reform was written by Jennie Herriot-Hatfield, Amy Monahan, Sarah Rosenberg, and Bill Tucker. It is designed to examine the legal protections that govern employee pensions, as well as look at some of the modifications that states have successfully enacted.
As the report authors note, “pension reform is not just a financial, ethical, educational, and political issue. It is also a legal issue. And a complicated one at that.” As states work to make changes in their pension programs—something 39 states have done in the last two years—they must strike a balance as they navigate legal constraints, which can vary from state to state.
The guide provides legal profiles of four states: California, Illinois, New Mexico, and Ohio. The four states illustrate the levels of pension protection provided to employees across the country. In discussing each of the state legal frameworks, the authors answer the following questions:
- How does state law protect public employee pensions?
- Can benefits that have already been earned be reduced?
- Can benefits be changed for future years of service?
- What about cost-of-living adjustments?
An appendix provides an overview of two dozen states, including the legal framework governing the state’s pension system and representative cases that have helped define state law.
In a time of continuing stress on state budgets, the pension issue will remain high on the priority list. “If states don’t act to rein in pension liabilities, state contributions will eat up an increasingly greater share of revenues, crowding out funding for everything from repairing roads and providing social services to hiring and retaining high-quality teachers and principals,” the authors note.
Education Sector is an independent think tank that challenges conventional thinking in education policy. We are a nonprofit, nonpartisan organization committed to achieving measurable impact in education, both by improving existing reform initiatives and by developing new, innovative solutions to our nation's most pressing education problems.