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Pension Quick Takes: Axis of DOOOOOOM

by meep

12 March 2015, 22:15

Yes, I know Monty at AoS has the corner on DOOOOOOM, but I haven’t seen him around as much, so I’m grabbing it.

First, let’s check out this week’s top referrers:

Search results:

Anyway, who are the Axis of DOOOOOOM?

Let’s start with the obvious members.

ILLINOIS

There was an Illinois Supreme Court case this week. The state, I think, is doomed:

About the lawsuit: I am already on record that I think Illinois will lose this case.

Public pensions: Illinois will lose all of its lawsuits on pension reform on the basis that the reform of pensions for current employees (not retirees) is unconstitutional. These rulings will come down in 2015.

I still agree with this prediction.

I will grab a couple quotes from the above links.

The 40 words on which the case depends:

“Membership in any pension or retirement system of the state, any unit of local government or school district, or any agency or instrumentality therof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

Here’s how one lawyer categorized the state’s argument:

Thomas also asked Shapiro if it was “incongruous” for the state to allow the Illinois income tax rate to roll back 25 percent on Jan. 1, costing the treasury more than $4 billion a year, while at the same time claiming a financial emergency.

Shapiro, however, said such a question warrants sending the case back to Belz to determine whether a true emergency existed that would justify the state invoking extraordinary powers to reduce pension costs.

Aaron Maduff, an attorney representing public workers and retirees, told justices Shapiro’s position was akin to: “I killed my parents. Have mercy on me. I’m an orphan.”

Yeah, I don’t think that the judges are going to buy the state’s arguments. Especially since the judges have a direct interest.

Last quote

“If the court holds that the state can invoke its police powers to violate core constitutional guarantees to respond to an emergency that at least arguably the state itself created, then aren’t we giving the state the power to modify its contractual obligations whenever it wants?” Thomas asked Shapiro. “For instance, the state could simply fail to fund the pension systems and then claim an emergency.”

Yup.

A couple of related points:

Next obvious member is:

NEW JERSEY

I will go back to this NASRA report next week.

Long story short: New Jersey is screwed.

Or, as John Bury puts it:

One obvious intent of the report is to pin blame for the impending collapse of the New Jersey retirement system on New Jersey itself rather than a flawed funding system that allows politicians to low-ball contributions and deputizes actuaries to find the means.

Of course New Jersey is a fiscal basket case. If it were an individual it would be declared without capacity to enter into contracts. But the system for funding public plans is also at fault and will bankrupt all defined benefit plans (though not as quickly as New Jersey) and the NASRA report tacitly admit as much in the first paragraph.

And then I have the final member of the Axis of DOOOOM:

PENNSYLVANIA

And the fix to these problems?

Pennsylvania Governor Calls for $3 Billion Bond for Pensions

NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO

Argh.

Anyway, it’s a run to ruin…. who will get there first?

I’m still thinking it will be Illinois.

STUMP » Articles » Pension Quick Takes: Axis of DOOOOOOM » 12 March 2015, 22:15

Pension Quick Takes: Axis of DOOOOOOM