Legal Constraints on Changes in State and Local Pensions

The brief’s key findings are:

• In responding to pension shortfalls, most states are legally constrained from reducing future benefits for current workers.

• These constraints make it difficult to adjust to changing conditions and to share the burdens of reform fairly between new and current participants.

• The legal boundaries for pension benefits are typically defined under a contracts-based approach rather than a constitutional provision.

• Narrowing the contract definition to when the worker performs the service would still protect benefits earned to date, while allowing adjustments to future benefits.