An Act Relating to the Reduction of Inequitable Benefits in State Pensions Exposed

An Act Relating to the Reduction of Inequitable Benefits in State Pensions was considered by ALEC's Tax and Fiscal Policy Task Force at the 2010 States and Nation Policy Summit on December 2, 2010. This bill was part of the ALEC task force agenda between 2010 and 2012, but due to incomplete information, it is not known if the bill passed in a vote by legislators and lobbyists at ALEC task force meetings, if ALEC sought to distance itself from the bill as the public increased scrutiny of its pay-to-play activities, or if key operative language from the bill has been introduced by an ALEC legislator in a state legislature in the ensuing period or became binding law.

ALEC Draft Bill Text

Intent Section

The Legislature finds that the United States Constitution, as interpreted by the U.S. Supreme Court, provides that a state is justified in impairing a contractual obligation if it has a significant and legitimate public purpose, such as the remedying of a broad and general social or economic problem, such as the elimination of unforeseen windfall profits, and that an impairment may be constitutional if it is reasonable and necessary to serve an important public purpose.

It is the Legislature’s intention that inequitable benefits be reduced for state and municipal employees to the appropriate equivalent federal or private sector level of benefits since the meeting of inequitable obligations threatens the state and municipalities’ ability to provide essential government services within a tax level suitable to the general welfare.

Short Title

This Act shall be known and may be cited as the “Inequitable Benefits Reduction Act.”

Definition

Inequitable benefits means retirement benefits (both pension compensation and medical coverage) that in the aggregate exceed the median of similar benefits for career federal employees or private sector employees for positions of comparable responsibilities and direct compensation.

Reduction of Inequitable Benefits

Accrued obligations to all state and municipal workers shall be immediately adjusted to a level comparable to that of career federal employees, or, in the election of the legislature, private sector workers for positions of comparable responsibility and direct compensation. Such adjustments shall be calculated by an independent review panel appointed by and answerable to the state [Comptroller] and, due to inherent conflicts of interest, sole jurisdiction for judicial review of such adjustments shall vest in the appropriate federal court and not the courts of the state. The Legislature directs the state [Comptroller] to eliminate from calculation all abusive practices such as, without limitation, use of overtime provisions to increase the compensation base against which retirement benefits may be calculated.