Working Paper: NBER ID: w16792
Authors: Jeffrey R. Brown; Robert Clark; Joshua Rauh
Abstract: This paper provides an overview of an economics-based perspective on the financial aspects of state and local public pensions in the U.S. Drawing on the research commissioned for an NBER research program on this topic, we discuss the large degree to which public pension liabilities exceed the assets set aside to fund them. We summarize issues related to the optimality of pre-funding, portfolio allocation, the discounting of liabilities, as well as how plans operate in practice. We also lay out an agenda for future research related to financial aspects of public pensions, retiree health plans for public employees, as well as issues related to plan design and labor market outcomes.
Keywords: No keywords provided
JEL Codes: G18; G23; H55; H7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| pension liabilities (H55) | government fiscal health (H69) |
| underfunding of public pensions (H55) | funding ratios of public defined benefit (DB) plans (H55) |
| declining asset values (G32) | funding status of pensions (H55) |
| higher discount rates (E43) | underreporting of liabilities (G32) |
| insufficient contributions to pension funds (H55) | exacerbation of underfunding (H84) |
| proposed policy reforms (E69) | funding gap (I22) |