Thursday, May 24, 2012

Public pension fixes face legal challenges

Analysis: Public pension fixes face stout legal challenges | Reuters: " . . . . While legal fees pile up, the financial health of pension funds is worsening. In April, the Northern Mariana Islands, way out in the Pacific Ocean, became the first U.S. public pension fund to file for bankruptcy protection. States have tended to avoid trying to change pensions for existing retirees and have tried instead to raise retirement ages and lower benefits for new hires. While that strategy may help them avoid lawsuits, it also makes only a small dent in the financial problem. A case in point is Illinois, where pensions are among the most poorly funded in the country. Nearly two years ago, the state government tried to cut retirement packages for new hires but its unfunded pension liability remains at $83 billion. In fiscal 2013, starting July 1, state payments into the pension system will hit $5.2 billion, or 15 percent of general revenue spending. It was 6 percent in 2008. In April, Democratic Governor Pat Quinn went further, making existing employees contribute more or take fewer benefits. That choice was unfair and a violation of the state constitutional, said Michael Carrigan, speaking for public worker coalitions. . . . "

At this rate, states like Illinois will eventually pay 100% of general revenue into their pension systems. Nothing like "kicking the can" down the road.


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