NY Photographic / Creative Commons
NY Photographic / Creative Commons
Pension Reform

The Morality of Pension Forfeiture

A string of recent high profile public official corruption cases have brought the topic of pension forfeiture to the debate roundtable. Pension forfeiture is the revocation of a public employee’s pension after committing a noted crime while holding public office or working as the employee of a public entity.  Below are several individuals who have brought this issue to the forefront.

  • Former Illinois Gov. Rod Blagojevich received a 14-year sentence after a jury found him guilty of 18 corruption-related counts, including charges that he tried to sell the U.S. Senate seat vacated by President Barack Obama. Attorney General Lisa Madigan issued an opinion that he cannot collect a state pension.
  • Jerry Sandusky, the former Penn State assistant football coach who has been accused of molesting minors, and Gary Schultz, former Penn State senior vice president who has been accused of perjury, both face the loss of their pensions depending on a review by the Pennsylvania state pension board after their trials to determine whether they should be revoked.
  • Former Pennsylvania state Sen. Robert J. Mellow’s legal fate will be tied to a federal plea agreement; however, a state law will determine whether he gets to keep his pension or not. Mellow receives the second largest annual pension in the state. The Pennsylvania state pension board will also determine his pensions’ fate as in the case of Sandusky and Schultz.

The debate centers on whether governments should have the right to take away a public employee’s pension for criminal behavior. A Feb. 29 Governing article framed the argument this way: “Are pensions gifts from the states, which can be rightly revoked for criminal behavior? Or are they earned elements of an employee’s compensation, which are not subject to be annulled for any reason?”

The contentions
Those that believe pensions are revocable see them as awards bestowed to public officials for their principled public service. They believe that conviction of a crime or other illegal act while in office merits removal of these post-employment legacies. As in the cases of Sandusky, Schultz, Blagojevich, and Mellow, pensions are taken away or rescinded after the public officials are processed through the court systems and found guilty of a crime. These crimes are undoubtedly immoral or unethical as deemed by rule of law. Public officials come into office usually after taking an oath of office or vowing to the tacit agreement of holding public office that they are to serve in the best interest of the citizens or taxpayers they are representing. When they decide conscientiously to break these agreements in their own self -interest, they are breaking a contract with their constituents. In essence, they have turned their backs flagrantly to the people they have been elected or chosen to serve, and should not receive the “gifts” that would be conferred to them in return for faithful public service. Football coaches and university officials, such as Sansusky and Schultz, also have a duty as public employees since they garner a salary paid by taxpayer-funded dollars.

The other side of the coin considers pensions part of an employee’s remunerations, irrevocable regardless of their actions. This view likens pensions to an employee’s salary or wage, which should not be taken away once earned. For comparative purposes, private sector employees do not lose their assets if convicted of a crime or jailed, so why should public employees lose their “earned” compensation?

As previously mentioned, public employees must live up to different standards. They have voluntarily decided to work for the public knowing the condition stipulated is keeping the people’s best interest in mind. Pensions may be considered a part of a public employee’s compensation, but contingent only on the conclusion of loyal and devoted service. When an official cheats the system, they no longer deserve these benefits. The Illinois Supreme Court summarized this contract in its 1978 ruling declaring the state pension’s board to revoke former Gov. Otto Kerner’s person after several federal convictions. Justice Robert Underwood wrote that the public deserves the “right to conscientious service from those in governmental service,” defending the necessity for pension forfeiture.

Double-dipping and salary spiking
Pension forfeiture is not the only instance of the morality debate surrounding pensions.

Double-dipping, a term used to describe a public employee collecting retirement while also earning a salary for current work, is a topic that irks many taxpayers. Public officials will many times retire for a short period of time, collect their full pension, and then go back to their old job, collecting a salary on top of their pension.

Another is salary spiking. A pension is typically based on an employee’s highest annual paid year or years, frequently the final year’s pay. Public employees will sometimes inflate their salaries toward the end of their tenure by adding perks and bonuses to their final salaries. These capers strike at the original purpose of pensions. Public officials who double-dip or salary spike have their own interest in mind, scheme the public, and disregard the agreements, official or unofficial, they contracted into when they decided to enter public service.

The morality of these underhanded maneuvers has been brought to light and lawmakers have made efforts to prevent these widespread abuses. In December 2011, Ohio state Rep. Rex Damschroder introduced a bill that would ban double-dipping in the state. California Gov. Jerry Brown proposed to stop spiking by basing pensions on a three-year average of final pay to discourage “games and gimmicks … that artificially increase compensation” or on normal salary only without all the peripheral additions. More must be done in order to prevent these abuses, but these actions are solid proactive models for other state capitals.

If the shoe fits
Similar to reforms to prevent the acts of double-dipping and salary spiking, pension forfeiture is a necessary proactive reform to curb the immoral and unethical actions of some officials. Currently, only 23 states have provisions on the books regarding pension forfeiture. 27 have models they need to replicate.

Given the nature of public service, public officials knowingly and wittingly offer their lives to the public’s scrutiny. Once they decide to invalidate their unspoken agreements with their constituents, their post-employment benefits are no longer warranted. Essentially, just as they have broken promises to their constituents swearing a tenure of honorable service, public officials were never promised pensions if they commit a crime.


In Depth: Pension Reform

Modern, 401(k)-style plans are now commonplace in the private sector. For state workers, however, traditional pensions are still the norm. As former Utah State Senator Dan Liljenquist wrote in Keeping the Promise: State Solutions for Government Pension Reform, this is not a partisan issue, but a math problem. State Budget …

+ Pension Reform In Depth