Public pensions roll the dice

Article Highlights

  • Investment losses= limited resources for gov't programs & some public employees may face #benefit cuts

    Tweet This

  • 2007-2010:public pensions’ target asset allocations shifted 7% of assets to higher-returning (but riskier) investments

    Tweet This

  • More risk means #pensions impose a contingent liability on #taxpayers to bail out funds if investments fall short

    Tweet This

Pensions for state and local government employees lost 27 percent of the value of their investments from 2007 to 2008 and today assets are still below 2007 levels, while liabilities have continued to rise. In part, these investment losses stemmed from a decades-long trend toward riskier investments, which began with a shift toward equities in the 1980s, and today toward so-called alternative investments such as private equity and hedge funds. As a result of investment losses, taxpayers face larger pension contributions, other government programs are starved of resources, and some public employees may face benefit cuts.

How have these losses affected pensions’ investment strategies going forward? Did the financial meltdown result in public-sector pensions backing off these high-risk investment strategies, or have they doubled down in an attempt to make up their losses?

Andrew Biggs is a resident scholar at AEI.

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Andrew G.
Biggs
  • Andrew G. Biggs is a resident scholar at the American Enterprise Institute in Washington, DC. Prior to joining AEI he was the principal deputy commissioner of the Social Security Administration (SSA), where he oversaw SSA's policy research efforts and led the agency's participation in the Social Security Trustees working group. In 2005 he worked on Social Security reform at the National Economic Council and in 2001 was on the staff of the President's Commission to Strengthen Social Security. Andrew’s work at AEI focuses on Social Security reform, state and local government pensions, and comparisons of public and private sector compensation. His work has appeared in academic publications as well as outlets such as the Wall Street Journal, New York Times and Washington Post, and he has testified before Congress on numerous occasions. He holds a Bachelors degree from the Queen's University of Belfast, Masters degrees from Cambridge University and the University of London and a Ph.D. from the London School of Economics.

  • Phone: 202-862-5841
    Email: andrew.biggs@aei.org
  • Assistant Info

    Name: Veronika Polakova
    Phone: 202-862-4880
    Email: veronika.polakova@aei.org

What's new on AEI

image Swearing in the enemy
image Syria and American strategy
image Commencement speakers: Conservatives need not apply
image The literary profession and civic culture
AEI on Facebook
Events Calendar
  • 20
    MON
  • 21
    TUE
  • 22
    WED
  • 23
    THU
  • 24
    FRI
Tuesday, May 21, 2013 | 5:00 p.m. – 6:30 p.m.
Free beer: Liberating libations from ‘Bootleggers and Baptists’

Join us for a discussion of the history and future of federal and state alcohol regulation and competition, followed by a reception with beer, wine, and spirits.

Event Registration is Closed
Wednesday, May 22, 2013 | 5:00 p.m. – 6:30 p.m.
NCLB sanctions: Tests taken, lessons learned

Join education scholars and practitioners for a discussion about the latest NCLB research and its implications for future education policy.

Thursday, May 23, 2013 | 12:00 p.m. – 1:30 p.m.
Competing visions of the common good: Rethinking help for the poor

What shared commitments do we have as citizens and neighbors to care for one another? How can a proper ordering of America’s political economy enable the most people to have the best life? At this event, Rep. Frank Wolf (R-VA), a longtime champion of human rights causes, and AEI President Arthur Brooks will join Wallis in addressing these and other questions.

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.