As state courts across the nation prepare to referee numerous public pension reform disputes, a gaggle of interested parties — from major corporations to the Koch brothers — will next week sponsor an expenses-paid conference on public pension reform for judges who may decide the cases’ fates.
Conference funders, which include ExxonMobil, Google and Wal-Mart, could benefit from efforts to slash benefits for public employees. Alternative approaches to shore up state budgets would likely require higher corporate taxes, fewer corporate subsidies and reduced government services, all of which would be bad for business.
The three-day gathering in a Charleston, S.C., hotel is hosted by George Mason University’s Law & Economics Center.
The “Judicial Symposium on the Economics and Law of Public Pension Reform,” according to a George Mason event description, is intended to “comprehensively outline the underlying structure of pension systems, address the differences between public and private pensions and detail the unfunded liabilities and potential bankruptcy issues arising from this crisis.”
In all, about three dozen corporations — Ford Motor Co., General Electric Co., ConocoPhillips, drug maker Pfizer and the Dow Chemical Company also among them — are sponsoring the conference. Other funders include trade associations such as the American Petroleum Institute and the U.S. Chamber of Commerce, and conservative foundations such as the John William Pope Foundation and the Charles G. Koch Charitable Foundation.
Dozens of individuals are also helping bankroll the gathering; some state and federal judges themselves are listed sponsors, including Utah Judge Samuel D. McVey and Harris L. Hartz of the 10th U.S. Circuit Court of Appeals.
It’s unclear which judges — and how many of them — will be attending the conference, although George Mason’s judicial seminars are traditionally open to both state and federal judges. George Mason does not publicly list conference attendees, and federal judges who attend privately funded educational seminars aren’t required to publicly disclose which conference they attended until 30 days after it ends.
Henry Butler, executive director of the Law & Economics Center, did not respond to multiple requests for comment.
The Washington Post recently reported that conference funders provide more than just financial support — they also help coordinate who attends the influential seminars.
What is clear from the conference’s agenda is that attending judges will spend most of their time inside Charleston, S.C.’s Francis Marion Hotel listening to lectures and panel discussions led mainly by advocates of public pension reform. Bill Lurye, general counsel of the American Federation of State, County and Municipal Employees, stands out as one of the only panelists offering a union perspective on the pension debate.
Two of the conference’s featured lecturers — Todd Zywicki, a George Mason University law professor, and Eileen Norcross, a senior research fellow at George Mason University’s conservative Mercatus Center — co-wrote a 2010 op-ed headlined “How public worker pensions are too rich for New York’s — and America’s — blood.” The column decried unions’ efforts to thwart pension reform efforts.
“No one begrudges a secure retirement for police officers, firefighters and other public servants,” the authors wrote. “But unless states act now by closing insolvent plans to new hires and reducing the rate of benefit accrual for current employees, they won’t be able to shore up enough to guarantee at least some of what’s been promised.”
Norcross will lead an hour-long afternoon session on Monday titled “Pension Reform Options.” In 2011, Norcross testified before the U.S. House Committee on Oversight and Government Reform, where she recommended that states “[f]reeze or reduce the Cost of Living Adjustment, increase the retirement age, increase contributions from workers, and, importantly close the defined benefit plan to new hires.”
Zywicki did not respond to requests for comment. Mercatus Center spokesman Kyle Precourt told the Center for Public Integrity in an email that Norcross is “entrenched in research now and not available for media.”
For a session on “Legal Questions Raised by Pension Reform,” judges will listen to Amy Monahan, a University of Minnesota law professor. Monahan, who did not respond to requests for comment, has published research disputing court rulings that state statutes establishing a pension contract between states and employees cannot legally be broken.
She wrote in a 2012 paper that “changes to future pension accruals should be legally permissible absent clear and unambiguous evidence that the legislature intended to create a contract.”
Peter Kiernan, a New York attorney who co-wrote a recent report on public pensions, says arguments like these are exactly what judges will have to grapple with as pension reforms face legal challenges. In some states and cities, reforms have already reached the courts.
Illinois, for example, passed legislation in late 2013 that cut retirement benefits for public employees. Unions have since filed several lawsuits, claiming that the pension changes violate the Illinois Constitution, which explicitly states that contractual pension benefits “shall not be diminished or impaired.”
Now the fate of Illinois’ pension reform efforts rests in the hands of the courts. How they rule could have nationwide implications.
“If the Illinois Supreme Court says that what the Illinois legislature did is constitutional and legal, then the logjam has been broken,” Kiernan said, stressing that judges will be “enormously important” in resolving the pension reform dispute. “And you’re going to see all of those states attempt reforms with respect to current employees.”
Corporate push for public pension reform
To be sure: Public pensions across the nation are in rotten shape. Depending on who is making the calculations — and how those calculations are being made — state and local pensions nationwide are underfunded by anywhere from nearly $1 trillion to as much as $4 trillion.
Some states and cities are worse off than others. Illinois and New Jersey, two of the worst, are drowning in pension debt. Detroit and other cities, meanwhile, have even filed for bankruptcy in part because their pension shortfalls are so severe.
“Reform is necessary because it is creating an unsustainable burden on taxpayers,” said Todd Maisch, executive vice president of the Illinois Chamber of Commerce.
In Illinois, “I don’t think you fix the mess without pension reform,” he said.
Government officials find themselves left with difficult choices: Raise taxes and cut services to help increase their annual contributions to beleaguered pension funds, change the terms of public employee pensions to help lower the burden on state and local budgets, or do a little of both.
Reform advocates contend that public employees are enjoying lavish retirement benefits that are handcuffing states and bankrupting cities. They argue that states and municipalities should cut pensions for current and future employees. In some cases, that means shifting workers from employee-friendly defined-benefit plans to plans that more closely resemble private-sector 401(k) plans.
Public workers and their unions, too, have cried foul, arguing that their retirement benefits are far from extravagant and that attempts to change the terms of their pensions violate agreements they previously reached with state and local governments.
David Sirota, a liberal writer and commentator, wrote a 2013 report called “The Plot against Pensions,” which argued that “conservative activists are manufacturing the perception of a public pension crisis in order to slash modest retiree benefits and preserve expensive corporate subsidies and tax breaks.”
While public pensions face a $46 billion annual shortfall, the report found, it is “dwarfed by the $80 billion a year states and cities spend on corporate subsidies.”
“We are having a debate over pension shortfalls, calling them an emergency, when in fact they are in aggregate far smaller than what is spent each year on subsidies to business,” Sirota told the Center for Public Integrity. “And business likes that imbalance.”
Critics of pension reform worry that corporations and conservative lawmakers are winning a public relations battle intended to demonize public pensions while ignoring the broader scope of budget shortfalls.
Hank Kim, executive director of the National Conference on Public Employee Retirement Systems, said he’s tired of pension reform advocates claiming that state and local municipalities can only overcome their fiscal problems on the backs of public workers.
“If it’s really about ‘shared sacrifice,’ which is the terminology folks have been using since the Great Recession, it occurs to us that the groups that aren’t sharing the sacrifice are the wealthy and the corporations because they’re still getting the tax breaks,” he said. “You can’t be crying poverty when you are still giving away the shop to corporations.”
But a combination of higher taxes and poorer services could prompt businesses to move, said Patrick McGuinn, a political science professor at Drew University and author of a February report about the politics of pension reform.
“When you’re cutting things like education or health care or investment in transportation or technology, those are things that, to varying degrees, are going to affect corporations,” he said.
With so much at stake for businesses, some worry what kind of influence a corporate-funded conference might have on judges whose rulings could resolve the pension debate.
Sirota, for one, said the conference hosted by George Mason’s Law & Economics Center is “an effort to lobby judges.”
“It’s crossing a line that’s not supposed to be crossed,” he said. “What’s next? Is a company going to be able to hire a lobbyist to go lobby a judge in chambers?”
But what’s next for judges certainly includes another conference on public pension reform sponsored by George Mason’s Law & Economics Center. It’s scheduled for September in San Francisco.
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