HEALTH BENEFITS
Remember Wimpy? His famous line was: "I'll pay you tomorrow for a hamburger today." That is, in effect, the practice of states
Continue reading The political problem of the "Wimpy" state.
When special interest groups complain about not getting enough government money, they never provide the full context of what that would mean for other government programs. They simply make their argument in a vacuum; after all, it's not their job to explore every nook and cranny of a budget - they know what they want, and they place their priorities above all else.
In the union debate in Wisconsin, public labor groups have howled about paying more for their health and pension benefits, going so far as to try to recall Governor Scott Walker as a result of his new law. Of course, they ignore what would have happened to other state services, specifically for the sick and the poor, had Walker not required them to kick in a little more for their benefits.
Continue reading Unions prioritize themselves over services for the sick and poor.
My take in today's WSJ on the role that pension and retiree health care liabilities in states and cities are going to play in location decisions that businesses and even residents make, because people are going to be increasingly wary of buying into these huge liabilities as they see taxes increasing because of them. Below is a chart from the Civic Federation of Chicago showing that state's growing pension costs on the budget. Those costs, as I point out, are eating up much of the $7 billion tax increase that Illinois enacted last year on residents and businesses, sparking a revolt among firms.
One of the growing trends in California's era of economic recklessness has been the proliferation of local bankruptcies, often driven by the excessive legacy costs of public workers. As might be expected, the state's public-sector unions, perceiving a threat to their benefits, have been anxious to insulate themselves as much as possible from the fiscal pruning that accompanies these procedures. That's why last year organized labor got behind AB 506, a measure that requires "neutral evaluation" by a mediator for 60 days before a city can seek full bankruptcy protection (unless the city declares a fiscal emergency). The hope, of course, is that the evaluation process will lead to fewer union perks being gutted by reeling cities.
 One of the thorniest issues that states and municipalities have faced as
they seek to limit spiraling pension debt for government workers is
the issue of just how much of their retirement plans they can change. A researcher at the Federal Reserve Bank of Cleveland has contributed a valuable summation of state laws,
which depressingly shows that the majority of states have over the
years placed into legislation protections not just on past benefits that
workers have already earned through their service, but on any future
accruals for those already working for a state or its municipalities. This, union leaders contend, makes it impossible to alter a
pension plan for any worker already in the system, so that he can
continue earning benefits at the highest level possible for the rest of
his career. Of course, there is legal wiggle room. Courts have, for instance, declared portions of pension benefits, such as cost-of-living adjustments, as outside the law, allowing states to alter these benefits. But it seems likely we'll see plenty of court cases as the courts try to define just what constitutes acceptable change under the law.
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