I hope he’s right, but I’m not feeling nearly so sanguine. In most states, accrued public-sector pension benefits carry an effective property right, either through legal rulings or outright constitutional provisions. As Donald Kohn, the vice chairman of the Federal Reserve Board, put it, “For all intents and purposes, accrued benefits have turned out to be riskless obligations.”
Some states interpret these rights as prospective, meaning that not only does a public-sector employee have a right to the benefits he’s already earned, but he has a right to continue earning benefits at the same rate no matter how financially unsustainable the pension formula may be. These provisions make state pension benefits far more assured than even Social Security, which the federal government can legally cut at anytime.
Biggs’ analysis of the situation is interesting, and the looming pension-related budget problems in many states and localities deserves more attention. But it’s worth noting the rhetoric here. Since when do right-wing analysts “hope” that forecasts of weak property rights are correct, but find themselves “not feeling nearly so sanguine” once they realize that property rights have strong legal protections? It turns out that the answer is: When the property is union members’ pensions!
Meanwhile, public sector pensions are always a good pretext for linking to this funny, albeit profane AFSCME video.