The Public Pension Crisis

Unfunded employee pension obligations will present a serious fiscal problem to state and local governments in the not too distant future. This article takes a looks at the causes and potential cures for the public pension mess, mainly through the lens of legal doctrines that limit public employers’ ability to avoid obligations. As far as the causes are concerned, this article examines the political environment within which public pension promises are made and funded, as an attempt to understand how this occurred. The article then turns to ask if states could implement meaningful reforms without violating either state or federal law. In particular, the article looks at state balanced budget requirements, state constitutional provisions regarding public employee pensions, and federal constitutional law, and asks whether states could significantly reduce their pension promises to public employees without violating the law. The entire analysis must also be informed by the concerns of the employees and retirees whose perhaps sole source of retirement income would be reduced by changes in benefit levels. The article concludes with remarks placing the matter in that context, raising the possibility of a bailout to ameliorate the possibly disastrous consequences of reform to public employees and retirees.