Regulatory Reform

Deep Blue Pension Reform

It’s no secret that America’s pensions are a major cause of fiscal stress across the country. According to a report last year from State Budget Solutions, most analysts agree that the problem of state unfunded pension liabilities reaches into the trillions of dollars. In fact, we believe that unfunded pension liabilities are the largest threat to state finances today. Real pension reform is a critical component that must be addressed when looking to fix state and local budgets. More and more, concerned taxpayers are starting to realize that public pension reform needs to be a top priority for state policymakers. Coming on the heels of significant pension reform in Utah, Louisiana, and Rhode Island, the trend is now hitting specific localities. However, this isn’t just happening in fiscally conservative areas anymore, a few large cities in some deep blue states are quickly catching on as well.

It began when ultraliberal San Francisco passed historic public pension reforms last year that many considered unachievable. The measure cut costs to taxpayers by reigning in some of the out-of-control spending on public employee pensions and benefits. Citizens are beginning to wake up and realize that this issue needs to be dealt with in a responsible manner rather than simply being a partisan talking point. Even the famous liberal, Willie Brown, former mayor of San Francisco and Speaker of the California Assembly, took a stand for responsible pension reform.

This trend continued in California with voters approving major pension reforms in both San Jose and San Diego.

San Jose passed Measure B by a wide margin. It moved the city in a fiscally responsible direction by increasing employee retirement contributions and mandating that any future benefit increases be brought to the public for a vote. Since these and other changes to public pensions adopted in Measure B address both current workers as well as future hires, the citizens of San Jose face legal challenges from some public sector unions wishing to overturn the results.

Similarly in San Diego, all (non-police) new hires will receive a defined contribution 401 (k) retirement plan – like vast majorities of private sector workers. This is one of the best solutions to tackle the problem of out-of-control public pensions as outlined in ALEC’s State Budget Reform Toolkit.

Chicago Mayor Rahm Emmanuel, former chief of staff to President Obama, is even urging the city to adopt measures that give new city employees the choice of a 401 (k) retirement plan and a host of other measures aimed at responsible pension reform. He made clear that these measures were to ensure that the city could properly fund its services and retirement accounts in the future because the current system is unsustainable.

While there is still significant work to do in cities and states across the nation, the message from some traditionally deep blue areas is clear: Real pension reform is not a partisan issue, but one of mathematics and fiscal responsibility.


In Depth: Regulatory Reform

In his first inaugural address, Thomas Jefferson said that “the sum of good government” was one “which shall restrain men from injuring one another” and “shall leave them otherwise free to regulate their own pursuits of industry.” Sadly, governments – both federal and state – have ignored this axiom and…

+ Regulatory Reform In Depth