Rooted in Reason: Nurturing the Seeds of Liberty

Pensions–Responding to the Contract Question by grassroothawaii
February 13, 2011, 12:32 pm
Filed under: Uncategorized

by Malia Blom Hill

As our current governor struggles to find a way to deal with the coming pension crisis without alienating any of his core voter groups or raising taxes . . . oh, who are we kidding here?  Of course he plans to raise taxes if he can’t find any way out.  Heck, our Democratic legislature has yet to meet a tax that they don’t like, and they’re still spending like sailors in Waikiki.  And while the clear answer to the pension crisis is substantive reform, one of the first arguments we’re bound to see in the effort to subvert reform is about how the State has no choice but to abide by the contract it enters via the pension system.  But not so fast–ALEC (the American Legislative Exchange Council) has been working on model legislation for states in exactly this kind of predicament.  And they have anticipated the contracts problem.  But I’ll let the experts explain:

ALEC . . . has developed a model resolution that seeks to take advantage of what some scholars see as a significant legal opportunity offered by interpretations of the contracts clause of the U.S. Constitution. Model language in ALEC’s proposal, titled “A resolution to align pay and benefits of public sector workers with private sector workers,” says “the U.S. Supreme Court has ruled it permissible for states to modify contractual obligations for a significant and legitimate public purpose, such as the remedying of a broad and general social or economic problem.”
A draft of the ALEC resolution, which still has to undergo final approval by ALEC’s board, declares that accrued retirement benefit obligations to all state and local workers “shall be immediately adjusted to a level comparable to that of private sector workers for positions of comparable responsibility and direct compensation.” The resolution proposes that an independent federal review panel be created to make such adjustments, and suggests that sole jurisdiction over the changes be given to federal courts and not state courts because of “inherent conflicts of interest.”
Ralph Benko, a senior adviser at the conservative American Principles Project who worked with ALEC to develop the language, has concluded that the frameworks offered by two U.S. Supreme Court cases (Energy Reserves Group v. Kansas Power & Light and United States Trust Company of New York v. New Jersey) offer a promising legal opening for those who want to go after pensions. “Now there’s at the very least a persuasive, legitimate argument that we can do this,” Benko says. “Yes, it will require litigation and be challenged by the courts, but gosh, we have a strong case here.”
State Senator Jim Buck of Indiana, who chairs the ALEC task force that developed the resolution, emphasizes that the measure is meant to be used only in cases of true crisis. “It’s not summarily discarding a contract that you’re financially fit to take care of,” he says. “I don’t anticipate any state doing it unless they’re in a financial crisis.”

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