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Thursday, April 28, 2011

Pension Crisis Is Real, as Fates of Other Cities Show

Posted By on Thu, Apr 28, 2011 at 7:15 AM

click to enlarge Now featuring smaller pensions for cops
  • Now featuring smaller pensions for cops

With the interminable debate we've witnessed over pension reform during the last year, it's sometimes easy to forget that this isn't just another political shooting match over a characteristically trivial San Franciscan topic. (Dog parks, anyone?) Yet an article published this week in the New York Times shows the pension wagon really can go hurtling off the cliff -- and has, in fact, done so in other municipalities.

As the Times reports, a growing number of cities are slashing pensions, cutting jobs, and shrinking government services. In some cases, pension funds can go bust altogether. The story cites the cautionary tale of Pritchard, Ala., which simply stopped sending checks to its retired employees when its pension fund ran out in 2009. Sure, this contravened state law, but you can't pay out money you don't have.

Of course, that's an extreme case. But you don't need to range far afield for similar stories of the threat pension liabilities pose to cities' budgets and the pensioners themselves. Oakland laid off a sizable fraction of its police force last year, purportedly because of mounting pension costs. Detroit recently sought to freeze its pension fund completely, but was blocked by a labor arbitrator, who nevertheless allowed the city to reduce pension rates for police officers.

As the Times puts it:

Conventional wisdom and the laws and constitutions of many states have long held that the pensions being earned by current government workers are untouchable. But as the fiscal crisis has lingered, officials in strapped states, from California to Illinois, have begun to take a second look, to see whether there might be loopholes allowing them to cut the pension benefits of current employees. Now the move in Detroit -- made possible, lawyers said, because Michigan's constitutional protections are weaker -- could spur other places to try to follow suit.

It remains to be seen what San Francisco's solution to its pension crisis will be. But developments in other cities serve as a reminder to Mayor Edwin Lee and the various parties who have gathered around the table on pension reform -- as if they needed one -- that the crisis can't be ignored.

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Peter Jamison

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