Third of a Three-Part Series

Governors like Scott Walker of Wisconsin and Chris Christie of New Jersey have enacted modest pension reforms so far, yet they have stirred the pot on one of the salient issues of our time: public versus private sector pay.

The runaway pension deficits and phenomenon of six-figure takers in state and local government have stirred voter outrage, similar to the revolt against high taxes in the 1970s. Public employment used to be a bargain of less compensation for more job security than in the private sector, but now it offers more of both. So how do we put compensation, particularly retirement benefits, on equal footing between the two classes?

At the beginning of this year, the American Legislative Exchange Council, an organization of nearly 2,000 conservative state legislators, adopted model legislation devised and presented by American Principles in Action with that goal. One proposal adjusts public pensions to private sector levels, and the other converts the retirement offering from a defined benefit to a defined contribution. These policies provide a way for pension-burdened states to repair their finances and bring equity to the public-private worker divide.

As explained in Wednesday’s column, there is a legal case to be made for rewriting pension contracts when the situation calls for it. States have the recourse to get out from under burdensome commitments that threaten their economic livelihood. Backed by Supreme Court case precedent, they can amend their laws and constitutions to allow for pension payouts to be scaled back to fix an economic emergency.

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