Republicans Seek Ban On Public Pension Fund Bailouts

Republicans in the U.S. Congress Wednesday will introduce legislation to get tough on public pensions as worries grow that chronic underfunding will drive states, cities and counties to demand help from the federal government and drag it into a financial mess.

Republican Reps. Paul Ryan, Darrell Issa, and Devin Nunes, along with Sens. Richard Burr and John Thune, plan to unveil a bill for "enhanced transparency for state and local pensions," and prohibit the federal government "on any future public pension bailouts."

Ryan, Issa, and Nunes introduced similar legislation in the last session of Congress, but that was before Republicans took control of the House.

Issa now chairs the powerful Oversight and Government Reform Committee, and Ryan chairs the House Budget Committee, easing the way for the bill to pass.

Of the longer-term problems in state and local governments' budgets, none looms as large as underfunded pensions for public-sector employees. Estimates for state pension underfunding range from $700 billion to $3 trillion because of disparities in calculating future returns on investments.

The funds' investments took a bad turn during the financial crisis, and many struggling states cut their contributions to pensions during the economic recession to save money and avoided cutting vital programs when their tax revenue collapsed.

As they seek to reduce a projected $1.5 trillion federal budget deficit, congressional lawmakers are concerned that states will turn to them for help in keeping pension promises.

Some conservative leaders are going so far as to suggest states be allowed to declare bankruptcy, which they cannot do currently because the U.S. Constitution recognizes them as sovereign governments, so they can renege on pension agreements.

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