This from Bloomberg.com
Christie’s $29.7 billion budget for fiscal 2012 funds only 14 percent of the pension payment recommended by actuaries, even after his benefit changes enacted last year, Fitch said in a Jan. 31 report. Pension demands will rise if the state fails to achieve its 8.25 percent assumed return on investments, the company said.
And you thought public pensions were not a problem. From the union perspective here is another governor not funding the State’s promises. From the citizens perspective, well who cares about the citizen we all know there is no connection between income and property taxes and the pensions and benefits for state workers. And according to the Democratic party Republicans are out to destroy these unions in any case.
QUINNSCOMMENTARY 
Until 1998, states continued to add to their constitutional protections with respect to retirement benefits for public employees. In that year, Arizona and New Mexico added constitutional protections. Since then, however, some (but not all) states have been attempting to rein in pension plan costs – meeting some resistance from voters, public employees and in the courts.
The unfunded liability of public pension plans is staggering – estimated to be well in excess of one trillion dollars . In fact, by the time the Pew report was issued in 2010, evaluating unfunded liability as of June 30, 2008, the authors acknowledged that the $1 trillion gap between pension, health care and other retirement benefits, the gap between the promises and the assets on hand, was substantially understated. The June 30, 2008 data did not reflect the impact on plan assets from the dramatic stock market decline that was triggered by the financial crisis which started in September 2008. Pew, however, did not further caveat their study by confirming that the data they used also do not adjust for the:
• Substantial discount rate used by government entities ,
• The subsequent declines in short, intermediate and long term interest rates, which had a dramatic effect on pension plan liabilities, particularly where the pension plan is a final average pay pension plan, with an early retirement subsidy and a post-retirement increase or cost of living adjustment (COLA), and
• Liabilities for retiree medical benefits, which historically have been underreported because they have generally been accounted for on a “pay as you go basis” .
No matter the measure, however, coupled with the economic downturn from the recession, and its effect on state budgets, an increasing number of states and other government entities have increased their efforts at changing retirement benefits.
Expect to see a blood bath in many states, much like what we saw in Wisconsin and Ohio over the last year or so. Constitutional protections for public employee retirement benefits have been in place for decades. The protections may be incorporated in state constitutions. However, despite the potential for harm, some in Congress may favor federal action because not all states have incorporated protections for their public employee pension benefits. The strongest protections are constitutional protections vary from state to state, including:
• Pension rights guarantees,
• Pension funding,
• Retirement asset protections,
• Retirement systems management, including limits on the types of investments permitted, and
• Certain other protections.
Here is an example, out of the Louisiana Constitution (Governor Jindal just attacked the four public plans a couple of weeks ago) which provides:
“Membership in any retirement system of the state or of a political subdivision thereof shall be a contractual relationship between employee and employer, and the state shall guarantee benefits payable to a member of a state retirement system or retiree or to his lawful beneficiary upon his death.” (emphasis added is mine).
As contractual rights, changes to public employee pension benefits may also trigger protections under the U.S. Constitution via the Contracts Clause which provides that “[n]o state shall … pass any … law impairing the obligations of contracts …” and under the Takings Clause of the Fifth Amendment, which provides that “private property [shall not] be taken for public use without just compensation.”
Just what rights are protected – the formula in place as of the date of hire, as of separation, a pro-rata application of all formulas/accrual rates determined for each participant? If, for example, contractual rights protect the formula and provisions in place on the date of hire, a scenario could result where the plan might have 5 or 10 or more different formulas – and importantly, where the formula has been repeatedly improved, it could create the unintended result of seeing legislation which reduces existing accruals having the greatest impact on those with the longest service. However, if the contractual right is found to “vest” at separation, retroactively-applied changes, such as the change to post-employment benefit increases, may be challenged. Similarly, where such changes are precluded by litigation, the remaining option would likely be to dramatically and retroactively reduce benefits for active workers.
More to come….
LikeLike