First, I found this post, from Kil Huh of the Pew Center on the States (via Walter Russell Mead), to be interesting. Huh’s “five truths about public employee pensions” are:

1. Public pension funds face real funding challenges in a majority of states.
2. The funding gaps have real impacts on taxpayers and states’ budgets.
3. Policy makers must be responsible stewards of their pension plans.
4. There are no simple fixes.
5. States need to make sure retirement benefits are there for retirees and affordable for taxpayers.

It is important to remember that the pension funding issue

is the result of a decade of states taking pension holidays and raising benefits without paying for them, not the Great Recession. Investment gains of 20 and 13 percent in 2009 and 2010, respectively, were not nearly enough to overcome losses from the financial crisis, and pension funding levels continued to drop. The weak returns of less than 1 percent at the end of 2011 also show how hard it will be for states to invest their way out of this crisis. Initial projections suggest that funding levels will be stagnant in fiscal year 2011, and in some states will continue to drop.

Second, the Center for Retirement Research released a new report this month, “Legal Constraints on Changes in State and Local Pensions.” The report gives an overview of the “legal basis for protection of public pension rights” in each state. Past and future pension accruals may be protected by a state’s constitution or through contract or property law. According to the report, “Most states protect pensions under a contracts-based approach” — including Washington, which protects both past and future accruals of core benefits.

The report concludes that

In many states, a key challenge is narrowing the current definition of the employer-employee contract to establish that the contract is created when the employee performs the service. Such a standard would be much clearer than the morass of provisions that currently exists across the states, would enable state officials to undertake needed reforms, and would put public sector workers on an even footing with those in the private sector.

Further,

A failure to permit such changes, however, would have serious consequences. First, limiting pension reductions to new workers reduces pension costs only slowly over time. Second, exempting current workers from cuts creates a two-tiered compensation system under which workers doing similar jobs would receive different amounts based solely on when they were hired.

Lastly, back in June, I noted that the Governmental Accounting Standards Board (GASB) had approved new standards for public employee pension accounting. Earlier this month, GASB released the full versions of the new standards (available here and here). According to the “plain-language description” of the standards,

The guidance contained in these Statements will change how governments calculate and report the costs and obligations associated with pensions in important ways. It is designed to improve the decision-usefulness of reported pension information and to increase the transparency, consistency, and comparability of pension information across governments.

Also,

While this information will, in some cases, give the appearance that a government is financially weaker than it was previously, the financial reality of the government’s situation will not have changed.