by Richard A. Epstein
February 18, 2014
Public employee pension reform is a hot topic. This past week Rhode Island settled its dispute with the unions over its sweeping pension reform statute of 2011. Detroit and San Jose are wrangling over their own deals with their respective unions. Other cities and counties will follow. None of these jurisdictions can ignore the huge holes in their pension programs for both retired and active employees. One estimate puts the total amount of unfunded pensions in the United States at between $730 billion and $4.4 trillion, with the smart money betting on the higher estimates. Systematic deficits of this sort do not just happen. Fierce union pressure, bad economic circumstances, and unsound pension design all contribute to the bottom line. If unions don’t back off, they may dig the bankruptcy hole deep enough that their fully accrued benefits could easily be put in jeopardy as well.