As we’ve argued for some time here at Buckeye, public pension reform is not an issue of partisanship or ideology—it’s one of math. The fact is that states, including Ohio, have made overly generous promises that they simply cannot afford to keep in today’s economy. Everyone agrees that reform is necessary; the only question remaining is one of scope.
Surprisingly, several of the most polarized, left-leaning states in the nation are leading the charge for real reform, and on a bipartisan basis. In California, GOP state lawmakers have recently thrown their support behind Democratic Gov. Jerry Brown’s hybrid pension plan reforms. California’s pension crisis is well known: nearly $500 billion in unfunded liabilities according to some estimates.
In Rhode Island as well, bipartisanship is the name of the game. In a legislature dominated by liberal Democrats, the Rhode Island House and Senate passed hybrid pension reform legislation last year by votes of 57-15 and 34-2, respectively. The legislation cut Rhode Island’s existing unfunded pension liabilities by 40 percent and will save taxpayers $4 billion over the next 24 years.
As we’ve advocated in our report, Hanging By a Thread, hybrid pension plans are a far superior alternative to woefully underfunded and increasingly expensive defined-benefit plans. They more equitably balance investment risk and produce benefit levels closer to those found in the private sector. They’re a forward-thinking solution to a recurring problem.
Bipartisan agreement is rare on contentious, critical issues. But sometimes the impending consequences of the failure to reform are more powerful than party identification. Such is the case with public pension reform. Left checked and without comprehensive reforms, runaway public pension costs will mandate either taxpayer bailouts or unfulfilled promises to our public employees.
Fortunately the path for reform has already been established and has proven successful. The only ingredient lacking for remaining states like Ohio is that of legislative courage. Legislators in California and Rhode Island have read the writing on the wall and taken bold steps for reform; Ohioans should demand the same.