State and local government pension reform has
become a front-burner issue in the wake of the economic
crisis, which sharply reduced funded ratios for
most plans. Policymakers have responded primarily
by raising employee contributions for all workers
and/or reducing benefits for new workers. One
option that has largely been off the table is reducing
future benefits for current workers. The reason is that
many states face legal constraints on their ability to
make such changes. These constraints not only tie
the hands of pension reformers but also accord public
employees greater protections than their private sector
counterparts.