A new book has been written on public pensions. As reported in Governing, Alicia H. Munnell‘s, “State and Local Pensions: What Now?” compares state and local public pensions plan across the nation and assesses which have succeeded in providing reasonable benefits, paying their required contributions, and accumulating assets. In her analysis, the author looks at state and local governments’ revenues, pressures on pensions, and trends in pension-plan investment practices.
Going forward, there are long-term issues that must be addressed by all public-pension plans. Most governments’ revenue systems are outdated and simply do not provide enough revenue. Meanwhile, the great weakening of private-sector pensions has resulted in “pension envy,” making it very difficult to increase taxes to support public-employee pensions and easier to cut pension benefits. Finally, Munnell notes, public-pension plans are chasing each other up “the ladder of risk,” holding too large a share of their assets in riskier investments.
The author is Director of the Center for Retirement Research at Boston College.