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OpenMarket: Pensions

  • The Dangerous Posturing of New York's Fossil Fuel Pension Divestment

    January 11, 2018

    The real measure of future taxation is the projected level of government spending. That simple truth makes filling the funding gaps of public employee pension funds crucial for states’ and municipalities fiscal health—as well as for the well-being of taxpayers who...
  • Pension Bailout Bill Would Put Taxpayers on the Hook for Billions

    December 18, 2017

    How do you make a bailout not look like a bailout? Call it a loan.

    The recently introduced Butch Lewis Act (S. 2147) would put taxpayers on the hook for billions of dollars in unfunded pension liabilities under the guise of loans from the U.S....

  • Pension Liabilities Bite in the Present, Too

    October 11, 2017

    Politicians often like to kick the can down the road when it comes to debt. Few things illustrate that better than the large pension deficits many state and local governments around the country are now facing. That’s not surprising, given the temptation to pass the bill on to future office holders.

    Yet, the pain isn’t all in the future. As a new study from Stanford University’s Institute for Economic Policy Research shows, increasing pension payments are straining California cities’ finances in the here and now. Steven Greenhut of the California Policy Center describes the extent of the problem:

    [T]here’s a huge, current problem even for the bulk of...

  • Missouri's $5 Billion State Pension Underfunding Shows Results of Faulty Accounting

    September 14, 2017

    Yesterday, Missouri State Treasurer Eric Schmitt announced that the state’s public employee pension plan was underfunded by $5 billion. That is an eye-popping amount, but the story is a sadly familiar one:

    The treasurer placed blame on the retirement issue on past administrations for what he said were unreasonably high expectations of investment earnings. Schmitt said returns have been below predictions for 16 of the past 17 years.

    According to data from the Missouri State Employees’ Retirement System, investment returns have averaged close to 7 percent over the past 20 years. Returns have been lower in recent years, averaging close to 4.5 percent over the past 10 years and less than one percent over...

  • RealClear Radio Hour: Political Disasters in Science and Economics

    December 12, 2016

    This week on RealClear Radio Hour, Marc Edwards and Dan Liljenquist recount politically induced disasters from the perversion of science to the pension crisis.

    My first guest is Marc Edwards, Professor of Environmental and Water Resources Engineering at Virginia Tech. Marc discusses institutional scientific misconduct in academic and government-funded science and details how the U.S. Environmental Protection Agency and Centers for Disease Control and Prevention created and covered up both the D.C. and Flint, Michigan, lead and drinking water crises. He describes how upper management cultivates a culture of corruption to promote their policy agency agenda, risking loss of public trust in science. 

    ...
  • Unfunded Public Pension Obligations Grow to $5.6 Trillion

    October 19, 2016

    State public pension plans are underfunded by nearly $5.6 trillion nationwide, according to a new American Legislative Exchange Council (ALEC) study. Naturally, the level of pension funding and the size of liabilities vary widely across states. Given that, the new ALEC report provides useful comparisons based on three criteria:

    • Funded ratio;
    • Total unfunded liabilities; and
    • Per capital unfunded liabilities.

    In terms of funding ration, Wisconsin scores the best, at 63.4 percent funding, the only state with a ratio above 50 percent. Connecticut scores worst, at 22.8 percent.

    Vermont has the nation’s smallest total pension obligation sum, at $8.7 billion; California the greatest, at $956 billion.

    Of course, Vermont is a small...

  • Air Traffic Control Reform Opponents Still Miss the Big Picture, Repeat Errors

    May 16, 2016

    Air traffic control is in dire need of reform and modernization, and there is a great plan in the House FAA bill to do just that. But a handful of conservative activists have launched a campaign to roil reform. Last week, I published two posts debunking false claims made by critics. While the vast majority of free market advocates familiar with the issue support the air traffic control corporatization plan contained in the House’s AIRR Act, a small group of anti-union conservative advocates opposes these reforms, citing concerns over labor unions.

    The reform plan would transfer the...

  • PBGC's Perverse Incentives Undermine Multiemployer Pensions

    April 12, 2016

    For years, the Pension Benefit Guaranty Corporation (PBGC), the federal agency that insures private sector defined benefit (DB) pension plans, has been severely underfunded below what it needs to cover its payout obligations to retirees, especially for multiemployer pensions. Closing this funding gap is urgent. Yet despite greater attention to the problem by lawmakers, the media, and the public, the problem persists.

    A major reason for that is the perverse incentives built into the very workings of the PBGC. And it’s even worse for its multiemployer pension program.

    First, PBGC premiums are set by Congress—a sure way to politicize the process and end up with premiums that don’t reflect actual funding risks.

    Second is the “last man standing” rule, under which...

  • Illinois Pension Reform that Can Pass State Supreme Court Muster

    April 6, 2016

    When you’re in a hole, stop digging.

    That seems like such a simple concept that it shouldn’t need stating, but in the area of public pension reform, it’s often proven difficult to implement.

    For states facing huge pension shortfalls, it means to stop adding to the total of pension liabilities. When it has been implemented, as in Utah, it has worked.

    Better yet, it can be implemented in states whose constitutions prevent lawmakers from making any changes to pension obligations—as in Illinois, where a judge struck down a Chicago reform law on precisely those grounds.

  • Illinois' Narrow Road to Pension Reform

    March 28, 2016

    On March 24, the Illinois Supreme Court struck down a Chicago pension reform bill that sought to address the city’s considerable pension shortfall. In addition to posing a setback for Chicago Mayor Rahm Emanuel’s efforts to fix the city’s finances, the ruling highlights a problem some states face in attempting to bring their pension liabilities under control.

    As the late, great Yogi Berra would put it, last week’s ruling was déjà vu all over again. Last week’s ruling echoes a May 2015 case, in which the court ruled unanimously that SB1, a modest state pension reform law enacted during the administration of Governor Pat Quinn ran afoul of...

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