August 16, 2022

Bucks: The Impossible Public Pensions Choices

Last summer, I wrote about a brewing court battle in Colorado. At issue was the question of whether the state could reduce the annual cost-of-living adjustments for the pensions of state workers who were already retired.

I noted that the battle was the sort of thing we’d be seeing a lot more often as states and municipalities grew ever more reluctant to make taxpayers foot the bill for retirement benefits that now seemed outsize.

Well, this week the court in Colorado (and another one in Minnesota) found for the state and not the workers.

The workers will probably appeal, and we’ll probably spend years watching cases like these wind their way through the legal system. The battles will be fought in the legislatures, too. Already this year we’ve seen several states, including Wisconsin and New Jersey, demand more pension contributions from workers.

The big picture question, however, remains one that is more moral than economic. Decades ago, we made promises to government workers. Now, depending on your view, those promises have turned out to be too generous. Or they were based on funny math or absurd predictions of long-term stock market performance. Or they were undermined by the financial crisis, and it’s all the bankers’ fault.

Whatever your view, we now face a choice: Should all taxpayers (including the retired workers themselves) pay a lot more in taxes and accept large cuts in government services to pay for the promises to government employees? Or should we break the promises (by a little — or more than a little) because they have turned out to cost too much?

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