Public employee pensions: How large are the deficits? What changes can be made?

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Event Summary

Public pension funding has become a heated policy issue, three experts revealed at a lunch event at AEI on Thursday, approaching the complicated topic from different perspectives. Amy Monahan, a professor of law at the University of Minnesota, shared the legal context of public pension reform, which, unlike private pensions, is under state rather than federal jurisdiction. She highlighted that differing interpretations of pension agreements across states lead to varying levels of reform opportunities within each state.

Economist Kent Smetters of the University of Pennsylvania and actuary Paul Angelo of the Segal Company then debated the valuation practices of public pension liabilities. Smetters criticized the current valuation practice, which takes into account expected returns on pension assets and places the risk of long-term investment on taxpayers. He argued for a fair-market valuation of public pension liabilities, which would use a lower discount rate because pension benefits must be paid regardless of investment performance.

Angelo defended the current valuation process, which provides information on the expected costs associated with funding future benefits based on both current information and actuarially reasonable expectation of future events. He argued that the market approach overstates liabilities and would unnecessarily burden current taxpayers.

--Brittany Pineros

Event Description

Pension underfunding has dominated the media and created significant concerns for state lawmakers as they struggle to bring their fiscal houses in order. Before any reforms can be enacted, certain questions must be answered: in reality, how large are the funding shortfalls, and what are the legal boundaries within which reforms can take place?

At this event, panelists will address pension reform challenges by presenting the results of three research papers commissioned by AEI through a generous grant from the Smith Richardson Foundation. Kent Smetters will present the case for market valuation, while Paul Angelo will explain how current pension valuation practices are useful to policymakers. Amy Monahan will discuss the legal restrictions surrounding pension reform.

If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours. 

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About the Author

 

Alan D.
Viard
  • Alan D. Viard is a resident scholar at the American Enterprise Institute (AEI), where he studies federal tax and budget policy.

    Prior to joining AEI, Viard was a senior economist at the Federal Reserve Bank of Dallas and an assistant professor of economics at Ohio State University. He has also been a visiting scholar at the US Department of the Treasury's Office of Tax Analysis, a senior economist at the White House's Council of Economic Advisers, and a staff economist at the Joint Committee on Taxation of the US Congress. While at AEI, Viard has also taught public finance at Georgetown University’s Public Policy Institute. Earlier in his career, Viard spent time in Japan as a visiting scholar at Osaka University’s Institute of Social and Economic Research.

    A prolific writer, Viard is a frequent contributor to AEI’s “On the Margin” column in Tax Notes and was nominated for Tax Notes’s 2009 Tax Person of the Year. He has also testified before Congress, and his work has been featured in a wide range of publications, including Room for Debate in The New York Times, TheAtlantic.com, Bloomberg, NPR’s Planet Money, and The Hill. Viard is the coauthor of “Progressive Consumption Taxation: The X Tax Revisited” (2012) and “The Real Tax Burden: Beyond Dollars and Cents” (2011), and the editor of “Tax Policy Lessons from the 2000s” (2009).

    Viard received his Ph.D. in economics from Harvard University and a B.A. in economics from Yale University. He also completed the first year of the J.D. program at the University of Chicago Law School, where he qualified for law review and was awarded the Joseph Henry Beale prize for legal research and writing.
  • Phone: 202-419-5202
    Email: aviard@aei.org
  • Assistant Info

    Name: Regan Kuchan
    Phone: 202-862-5903
    Email: regan.kuchan@aei.org

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