"But the Pension Fund Was Just Sitting There"
The tension at the heart of pension politics is the incentive to satisfy today’s claimants in the here-and-now at the expense of long-term concerns. Rules and auditing standards are intended to tame this kind of short-sighted behavior in the private sector. In the public sector, the primary safeguard is the hope that public officials will not be unduly tempted by short-term considerations or influential constituencies.
Teacher pensions, in particular, pose two challenges. The first challenge is that political incentives invite irresponsible fiscal stewardship, as public officials make outsized commitments to employees. The second is that incentives hinder modernization, as policymakers avoid the politically perilous task of altering plans ill-suited to attracting talent in the contemporary labor market. The alignment of the political stars has helped states and localities to address the first challenge, but there is little evidence of a willingness to tackle the second.
The authors illustrate those dynamics through discussions of fiscal crises in New Jersey, Oregon, and San Diego and the way in which those crises created opportunities for addressing funding shortfalls. They close by suggesting several political strategies that could make pension challenges more tractable and encourage public officials and especially state legislators to be more responsible fiscal stewards or to revisit anachronistic retirement systems in pursuit of improved teacher quality.