June 29, 2011

The Wrong Starting Point on Pensions

Justin Katz

See, this is exactly the wrong starting point for resolving the state's pension problems; indeed, it's indicative of the wrong approach to government in general:

All of these ideas and more were batted about on Monday during the first meeting of the new Pension Advisory Group that state Treasurer Gina M. Raimondo, a Democrat, created in consultation with Governor Chafee, an independent. ...

... with Rhode Island's state-run, government-employee pension systems' $7.303-billion hole, the panel set itself a handful of seemingly simple goals: figure out how what a fair pension for a government worker should be, and then figure out how the state and its cities and towns should pay for those benefits.

No rational understanding of "fairness" is possible without prior knowledge of how a particular benefit is going to be funded. But it's just that backwards construction of pay and benefits in government, with its absence of market forces, that has moved the shovels of those who've dug our hole.

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A "fair" pension? That's easy. None. Switch to defined contribution. Done.

Posted by: Patrick at June 29, 2011 1:26 PM
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