The Case for Public Pension Reform: Early Evidence from Kentucky

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Authors
Hylton, Maria O'Brien
Issue Date
2014
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Journal Article
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FIRST PARAGRAPH(S)|Over the past few years, public pensions have moved from the extreme and obscure periphery of American politics toward the churning center. It is hard to find even an unsophisticated citizen who is unaware of the ongoing bankruptcy in the City of Detroit, the pension crisis in Illinois, or the bankruptcies of Stockton and San Bernadino, California. Public pensions (and other post-employment obligations, specifically health care), are penetrating the public's consciousness as they begin to threaten the ability of states and municipalities to perform the normal functions of government forcing a painful choice: dramatic tax increases and/or painful cuts in services. |The small city of Central Falls, Rhode Island, recently experienced all of this--cuts to the city budget with resulting job losses and tax increases. Nothing about that situation was attractive to any the key players, save possible the bond holders who were largely protected. Instead of waiting for a full-on crisis and the shock of bankruptcy, many rational voices have been calling for an entirely different approach: amend public plans now in order to avoid draconian cuts later. |This paper focuses on one state--Kentucky--that has taken this advice to heart and recently enacted substantial pension reforms. Although Kentucky has never been described as the worst state in terms of public pension finances--that honor goes to Illinois--this small state of only 4.38 million people sponsored plans that were only 30% funded as of 2012...
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Creighton University School of Law
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