David Goldstein links to the news that the Illinois Supreme Court has found certain pension reforms in that state to be unconstitutional. The New York Times reports,

The changes would have curtailed future cost-of-living adjustments for workers, raised the age of retirement for some and put a cap on pensions for those with the highest salaries. But under the state Constitution, benefits promised as part of a pension system for public workers “shall not be diminished or impaired.” . . .

[Gov. Bruce Rauner] said he believed that voters should consider a constitutional amendment that would mark a distinction between guarantees of benefits already earned and changes to future benefits. As it is, under the state’s Constitution, officials may assign new benefits to future workers, but cannot diminish benefits already promised.

Of course, here in Washington our public employee pensions are much better funded than elsewhere, and our Supreme Court has ruled that certain reforms are allowable. Goldstein writes,

For decades, lawmakers in Illinois and throughout the nation shifted the cost of government onto future generations by negotiating lower wages from public employees in exchange for higher pension benefits down the line… and then failing to raise the tax revenue necessary to back up these promises.

And therein lies the trouble with defined benefit pensions. Goldstein says “taxes have long been artificially low.” It’s easy to say so, but there is not a bottomless supply of taxpayers — budget constraints are real. The problem is with the bargain public employees made with legislators. By agreeing to a deal that shifts compensation and its costs forward, they allowed legislators to make big promises with little accountability (after all, if future legislatures must deal with the costs, why not?) with the expectation that benefits could never be rescinded and that they would be shielded from market risk.

What is becoming more and more clear is that this was a bad deal for the employees, as their long-ago-promised pensions swallow up taxes and take up budget space meant for government services today, and they are exposed to political risk that threatens those pensions. (More on the political risk here, here, and here.) Taxpayers and employees would be better served if state employee compensation is paid for when it is proposed, bringing clarity (and generational equity) to the budget.