Pension underfunding has dominated the media and created significant concerns for state lawmakers as they struggle to bring their fiscal houses in order.

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.

Those who follow the debate over fair-market valuation of public pension liabilities are aware that economists argue for using lower discount rates to value public pension liabilities but often are unaware of why economists believe what they do. This paper aims to better articulate those beliefs.

For a wide variety of reasons, many states and municipalities are turning a critical eye toward their employee retirement plans. As various parties debate the merits of different reform measures, it is important to keep in mind that in many states, the law limits potential reform options.

Current public pension valuation practice provides information on the expected costs associated with funding future benefits, which is relevant to policymakers and taxpayers. This paper argues that current practice is a better approach to measuring pension liability than is a theoretical market-based method. 

Andrew Biggs finds that the real value of unfunded pension liabilities for Missouri's five largest pensions is close to $54billion - far higher than the $11.1 billion officially reported. This liability, which amounts to nearly $9,000 for every man, woman, and child in the state, potentially can make all other budgetary issues facing the state look small in comparison. 

This event will feature a presentation from Carl DeMaio, who — as a member of the San Diego City Council — championed the pension initiative and now seeks to apply its lessons nationwide.

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GASB rules cause U.S. public pensions both to vastly understate their true liabilities and to take excessive investment risk, putting in danger both government budgets and the economy as a whole. With pension liabilities breathing down the necks of state and local governments around the nation, it is time for bond rating agencies to expose what GASB rules sweep under the rug. 

Pennsylvania, along with other states, faces large unfunded pension liabilities due to the structure of DB plans. The gravity of the problem is obscured by specialized accounting rules applied to these pensions. These discrepancies could be addressed by switching to accounting practices followed by the private sector and the rest of the world.