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To Enact Pension Reform, Make Good Policy Good Politics

broken-piggy-bankIn my previous post, I looked at some basic principles that should guide state policy makers when tackling pension reform. Now, we turn to the politics. And in that regard, Rhode Island's 2011 pension reform offers a useful example for other states to consider.

In his Brookings study, "Pension Politics: Public Employee Retirement System Reform in Four States," Drew University political science professor Patrick McGuinn looks at recent reform efforts in four states' experience in implementing pension reform.

Two of these states—Utah and Rhode Island—enacted significant structural changes to their pension systems while the two others—New Jersey and Illinois—enacted more limited changes that were less innovative.

Drawing lessons from those four states, he then outlines some basic principles for how to implement reform, citing examples.

States should make their complete actuarial payment every year. This is especially difficult to achieve, given politicians' temptation to spend on their constituents now and pass the bill on to some future successor. To address this, McGuinn recommends making the contribution a statutory, or even constitutional, requirement.

Need for a credible and visible reform champion. Of the four states analyzed by McGuinn, Illinois was the one sorely lacking in this regard. Rhode Island had Governor Lincoln Chafee and State Treasurer Gina Raimondo; Utah had state Senator Dan Liljenquist, chair of the Senate Retirement Committee; and New Jersey had Governor Chris Christie and Senate President Stephen Sweeney. But in Illinois, explains McGuinn:

Part of the challenge in Illinois apparently stems from the lack of a high-profile champion—such as Raimondo in RI and Sweeney and Christie in NJ—who is willing and able to invest political capital to make the case for pension reform to the legislature and the general public. Governor Quinn (who rose to the office when Rod Blagojevich went to prison) in particular has been widely criticized for his lack of leadership on the pension issue, with some observers saying that he does not know how to place an issue on the public agenda and sell it.

Gather and disseminate hard data. Raimondo in Rhode Island and Liljenquist in Utah both excelled in this, commissioning studies that helped them better define the problem and thus offer solutions to the public and policy makers.

Communicate and educate. Here again, the efforts in Rhode Island and Utah proved very effective, but the case of New Jersey is especially noteworthy, as it involved a bipartisan partnership between the governor and the Senate president.

If Senator Sweeney’s leadership was crucial inside of the legislature, Governor Christie’s leadership was crucial outside of it. Christie “went public” with speeches and 38 town halls, successfully creating a sense of crisis around the pension system and shifting public opinion in the state.

Avoid turning pension reform into and ideological issue. In this regard, the cause reform was helped in Utah and Rhode Island by the fact that they are both essentially one-party states -- one heavily Republican, the other heavily Democratic. That helped de-politicize the debate to a greater extent than it might have been possible in states with more competitive politics. In Rhode Island, the debate was largely an intra-party affair. In New Jersey, the bipartisan effort by Governor Christie and Senate President Sweeney had a similar effect. But in Illinois, things didn't go as smoothly, with reform being framed as "a battle between business and labor." By contrast, in Utah, says Liljenquist,

We did not make this a partisan issue, or blame our public employees—we tried to show compassion since the situation is a tragedy for them.

Demonstrate pensions' impact on taxes and other state spending priorities. Again, where the three other states succeeded, Illinois fails again. As McGuinn notes, legislators couldn't even agree on the extent of the problem.

Sell the benefits of pension reform to state workers and school reformers. To this end, argues McGuinn, "pension changes should be framed as ultimately in the best interests of pension participants relative to the consequences of the pension plans getting to the point where they can’t meet their obligations," and as an opportunity to shift education spending priorities.

Build a diverse coalition and a statewide advocacy campaign. This is the practical aspect of not making pension reform a partisan issue, and is essential to overcome union opposition.

It is important ... that the conversation not simply evolve into a business versus labor dynamic. Ideally, the pro-reform coalition will be diverse and broad-based and include groups from across the political spectrum—not just conservative and business groups but also social services groups who are concerned about how pension costs may affect their own state spending priorities.

In addition,

Given the unions’ threats of electoral retaliation to politicians who support pension reform, it is important that pro-reform groups promise to defend/support them at election time and then stick around to do so when the time comes.

Adapt a legislative strategy to particular state environment. This changes from state to state, so there is no single approach that will work everywhere.

RI emphasized a lengthy, transparent process with extensive engagement from a large number of legislators and the general public. NJ by contrast, achieved pension reform largely through a closed process of negotiations between Senate President Sweeney and Governor Christie’s office. Calling a special session of legislature (as was done in Rhode Island and Illinois) can be an effective tactic because it forces legislators (and the media) to focus on a single issue within a short time window and creats a more hospitable environment for reform.

Anticipate and plan for legal challenges. This means not only getting the legislative language right, but also knowing which battles to fight. For instance, the Rhode Island February 14 pension settlement, while it scaled back some of the savings of the 2011 reform, ended six legal challenges to the law, and with those the risk of the entire reform being overturned by some creative activist judge.