Governance and Legislation

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Governance

Pensions: A State and Local Challenge by Stephanie Morrison, Ph.D, for the Montana Legislative Finance Committee, September 30, 2011

This report is an introduction to the employer contribution pension funding model and the underlying policy choices of the legislature

Today’s pension shortfalls were caused in substantial part by the 2001 recession and the recent Great Recession. Those recessions reduced the value of assets in pension trust funds and made it difficult for some jurisdictions to find sufficient revenues to make required deposits into the trust funds. As a result, the average state pension fund is considered “underfunded,” meaning that there are not enough assets in the fund to pay 100 percent of the future retirement benefits that current state employees have earned, even taking into account the future investment earnings on those assets.

State and local retiree benefits are not subject, for the most part, to federal laws governing private sector retiree benefits. Nevertheless, there is a federal interest in ensuring that all Americans have a secure retirement, as reflected in the special tax treatment provided for both private and public pension funds. In 2004, new government accounting standards were issued, calling for the reporting of liabilities for future retiree health costs. As these standards are implemented and the extent of the related liabilities become known, questions have been raised about whether the public sector can continue to provide the current level of benefits to its retirees. GAO was asked to provide an overview of state and local government retiree benefits, including the following: (1) the types of benefits provided and how they are structured, (2) how retiree benefits are protected and managed, and (3) the fiscal outlook for retiree benefits and what governments are doing to ensure they can meet their future commitments. For this overview, GAO obtained data from various organizations, used our model that simulates the fiscal outlook for the state and local sector, and conducted site visits to three states that illustrate a range of benefit structures, protections, and fiscal outlooks. Cognizant agency officials provided technical comments which were incorporated as appropriate.

Constitutional Contracts Clause Challenges in Public Pension Litigation by Paul M. Secunda, University of Wisconsin Law School; Marquette University - Law School, April 8, 2011

The recent spate of high profile efforts by state governors to roll back public employee pension rights in light of recent budgetary challenges has shone the light directly on the importance to public employees of the Contracts Clause provisions of the federal and state constitutions. Using as an example the controversial budget repair bill in Wisconsin and the application of the bill’s pension provisions to Milwaukee City employee pension rights, this article has sought to show how, under certain specified circumstances, such legislative attempts may be constitutionally impermissible if such laws substantially impair employee contracts with the state without the necessary legal justification.

The District Court of the City and County of Denver, Colorado, will be the first of many courts to consider an upcoming state pension fund battle. In Justus v. State, the district court will hear a case brought by public employees who are suing the state and the Colorado Public Employees Retirement Association (PERA) for passing state legislation adjusting contractual pension benefits of retired, current, and future employees.As one of the latest state courts to hear a unilateral pension modification suit, the district court will likely apply a Contracts Clause balancing test typical of pension benefit cases.

Pensions and Retirement Plan Enactments in State Legislatures National Conference of State Legislatures; sorted by year, then by subject

A collection of pension and retirement plan enactments in state legislatures, sorted by year and then by subject.

Pensions and Retirement Plan Enactments in State Legislatures National Conference of State Legislatures, sorted by subject, then year

A collection of pension and retirement plan enactments in state legislatures, sorted by subject and then by year.