Institute for Research on Labor and Employment

For decades, America’s state and local governments have promised their workers increasingly generous pensions but failed to fully fund them, producing a fiscal problem of staggering proportions. In this paper, we examine the politics of public pensions. While it might seem obvious that the pension problem is due to Democrats and unions pushing for generous pensions over Republican resistance, we develop a theory—rooted in voters, interest groups, and myopic politicians—to argue that, during normal times, we should expect both parties to support generous (and underfunded) pensions, and thus to be responsible for the larger problem. It is only after the onset of the Great Recession, which disrupted normalcy by expanding the scope of conflict, that we should expect partisan conflict. Using a new dataset of state legislators’ votes on hundreds of pension bills passed between 1999 and 2011, we carry out an empirical analysis that supports these expectations.