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Public Pension Plans: Myths and Realities for State Budgets

Giertz, J. Fred and Papke, Leslie E.

Abstract:

We explore the interaction of state pension systems with state finances. We find that changes in pension assets are an important source of funding for state governments, but that states face incentive problems that impede funding efforts with the result that many plans are underfunded. We analyze the substantive differences between defined benefit and defined contribution plans for public employees and state governments. Regression analysis using a panel of 85 state public pension plans indicates some evidence of actuarial assumption manipulation to reduce funding pressure. Plan demographics and state tax revenues are significant influences on funding ratios, while plan features are not.

Citation

Giertz, J. Fred and Papke, Leslie E. (2007), Public Pension Plans: Myths and Realities for State Budgets, National Tax Journal, 60:2, pp. 305-23

DOI: dx.doi.org/10.17310/ntj.2007.2.07