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InsiderOnline Blog: August 2013

Other States Have Michigan’s Constitutional Problem, Too

Michigan isn’t the only state that complicates municipal bankruptcies (like the one going on in Detroit) with state constitutional provisions forbidding the diminishment or impairment of public pension benefits. Six other states have those provisions, too.  Those states are Alaska, Arizona, Hawaii, Illinois, Louisiana, and New York. Stephen Eide and Dean Ball write that these states “should consider removing these protections”:

Bankruptcy, a long and costly process, should be guided as much as possible by the principle of shared sacrifice among creditors. Constitutional pension protections enhance the uncertainty of an already-complicated process and deny negotiators the flexibility they need to reach an appropriate settlement with all parties. [“Constitutional Public Pension Guarantees: Unfair, Unaffordable, and Bad Policy,” by Stephen D. Eide and Dean Ball, Manhattan Institute, August 2013.]

Promises that cannot be kept won’t be—even if a constitution says otherwise.

Posted on 08/23/13 01:33 PM by Alex Adrianson

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