Public pension pain

November 6, 2011

THE ELECTORAL map turned redder in 2010, as Republicans swept not only the U.S. House of Representatives but also statehouses across the country. But there were big exceptions: Voters in deep-blue California, Illinois and New York once again picked Democratic governors to run some of the most populous — and financially troubled — states in the union.

Republicans won by promising to restore fiscal stability — and set about taking on public-employee unions to make it happen. There was no political hesitation for them; to the contrary, in some states they relished the chance to weaken the Democratic Party’s key constituency. Democratic governors, by contrast, faced a special challenge. They would have to show that they could cut costs despite their ties to unions. And a central issue would be states’ huge public-employee pension obligations.

There’s been some progress. In Illinois, where state public-employee pension plans have a worst-in-the-nation $80 billion unfunded liability, Gov. Pat Quinn and the Democratic legislature raised the retirement age to 67 and limited the maximum salary on which pensions can be based to $106,800. But Illinois pension funds still rely on an unrealistic average 8.25 percent projected rate of return. the rest