Kriss’s post below neatly lays out the argument for reforming the state pension system, one of the remaining issues under discussion in the 11th hour discussions in Olympia today. The Research Council has paid close attention to pension issues over the years, for example in the 2011 policy brief, Reforming Public Pensions. The Seattle Times today reiterated its support for the reform legislation.

The … pension reform proposal by Sen. Joseph Zarelli, R-Ridgefield, is a good bill and both houses should pass it…[It] ends subsidized early retirement for new hires. The bill doesn’t touch existing public employees at all. It leaves new public employees with a defined-benefit pension, which only a dwindling minority of private employees have at all, and it allows early retirement with discounts that are actuarily fair.

The reform bill is a modest step forward for the state. Today’s Financial Times reports that other states have taken gone further, sometimes only to see their reforms reversed in court.

“With public employee pension plans, it is state law that governs,” said Amy Monahan, associate professor at the University of Minnesota Law School. “Every state goes into this with a different set of legal rules.”

Some states had provisions in their constitutions protecting pension benefits and laws protecting those benefits or protections dictated by previous court decisions, Ms Monahan said. “It is always true that new hires are fair game.”

The bipartisan Senate proposal is smart legislation, limited to new hires. The sooner lawmakers act, the better. Failure to redesign programs to align with changing labor market conditions and actuarial realities can prove costly, as private sector union plans are now finding. From Sunday’s Financial Times:

The hole in the pension plans of US labour unions now stands at $369bn Credit Suisse has calculated with the aid of new reporting standards. This raises the prospect of higher pension contributions for employers and deteriorating industrial relations.

Multi-employer pension schemes, managed by trade unions on behalf of members working for many different employers, are now just 52 per cent funded, the bank calculates with most of the burden to close this gap likely to fall on small and midsize companies.

Walter Russell Mead observes:

For years, workers in private sector companies covered by collective bargaining agreements have thought that their pensions were secure. They aren’t, if these new studies can be trusted.

Eventually, the house of cards topples. Eventually is now.