2 thoughts on “Forbes post, “Beating A Dead Horse, Etc.: Here’s More Research On Public Pensions and the ‘Contracts Clause’”

  1. In California, most of the 2012 pension reforms (reductions) applied to new employees only. Employee contribution increases, however, were increased by collective bargaining and applied to all employees. Contributions were increased by 3-5 percent, and general salaries were increased by the same amount. (Pension impairment offset by something of equal value?)
    Except the contribution increases began in July 2012, and salary increases followed in 2013 or later, conditional upon sufficient revenues.

    “determination of funding availability […] shall be at the sole discretion of the Director of the Department of Finance.”

    The general salary increase would be the first for Unit 12 employees (and most others) since 2007-08. By tying it to contribution increases, they perhaps met the letter of the law, if not the spirit.

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  2. The Law of Eminent Domain can solve the pension crisis as the Supreme Court has affirmed that it doesn’t only apply to land but to all properties. Government only needs a compelling interest that serves the need of the public and complies with the 5th (or 14th) Amendment requirement that private property cannot be taken without “just” compensation: i.e., not a required dollar-for-dollar settlement. Eminent Domain, an extraordinary process placed in the Constitution to resolve dilemmas, can provide the big stick to compel the amending of these outrageous and exorbitant pensions and bringing them back to reality before government at all levels goes bankrupt. When factoring in retirement benefits, public employees on average are paid and receive benefits 78% higher than private employees performing comparable work. There is a lot of room for negotiations when determining “just” compensation. Retirement is a government granted property right that can be amended through Eminent Domain, which will provide a permanent settlement better than bankruptcy.

    Retirees and their unions must yield to the sovereignty of Government when it evokes the power of Eminent Domain when a compelling public interest arises, and the Eminent Domain process does not impair a contractual labor obligation but rather “takes” a portion of the fruit derived from it. Saying that Eminent Domain impairs a contract is like saying that the income tax, which is essentially a labor contract, impairs the agreement between employer and employee.

    Another option is the power of the state to levy taxes. It has been estimated that the California pension dilemma could be averted by simply imposing a 50 percent surtax on all retirement income in excess of $40,000, but public employees and their unions have grown accustomed to the idea that taxpayers alone should pay for everything. Therefore, no politician would dare contemplate this simple solution since union money keeps them in office. In short we have a pension crisis simply because politicians derive benefits from it and do not want to fix it.

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