Commentary

Some Steps for Congress on Pension Reform

In this Wall Street Journal column Reason’s Carl DeMaio explains how severely unsustainable are many state and local government pension plans.

A 2011 study by the Congressional Research Service pegged the combined liabilities faced by state and local pension funds at over $3 trillion. That is more than all the bonded debt officially listed on state and local balance sheets combined. To put the issue in perspective, all the federal tax hikes approved by Congress on Jan. 1 would pay less than 20% of America’s state and local pension debt over the next 10 years.

Naturally, solving that problem is mostly a state and local issue.

But there are a few useful things Congress can do. It seems odd these days to ask Congress to do something fiscally responsible, since that seems so far from their agenda, but the fixes have to start somewhere.

First, Carl points out that

Washington has tightly regulated private pension systems since the 1974 Employee Retirement Income Security Act, but that law exempted the pension systems of state and local governments. Four decades and $3 trillion in debt later, it is clear Congress made a mistake.

Second,

Scores of state and local governments are using “pension obligation bonds” to bail out troubled pension programs on the risky wager that they can beat Wall Street investment returns. There is $64 billion in such bond debt outstanding in the U.S., with more expected to flood the market this year.

Borrowing to make payments into a fund for future pension obligations is like me borrowing from my bank to pay my credit card. Bad financial management. Unfortunately, federal tax policies encourage pension obligation bonds, and Carl recommends changing that.

Read the whole thing here.

Adrian Moore

Adrian Moore, Ph.D., is vice president of policy at Reason Foundation, a non-profit think tank advancing free minds and free markets. Moore leads Reason's policy implementation efforts and conducts his own research on topics such as privatization, government and regulatory reform, air quality, transportation and urban growth, prisons and utilities.

Moore, who has testified before Congress on several occasions, regularly advises federal, state and local officials on ways to streamline government and reduce costs.

In 2008 and 2009, Moore served on Congress' National Surface Transportation Infrastructure Financing Commission. The commission offered "specific recommendations for increasing investment in transportation infrastructure while at the same time moving the Federal Government away from reliance on motor fuel taxes toward more direct fees charged to transportation infrastructure users." Since 2009 he has served on California's Public Infrastructure Advisory Commission.

Mr. Moore is co-author of the book Mobility First: A New Vision for Transportation in a Globally Competitive 21st Century (Rowman & Littlefield, 2008). Texas Gov. Rick Perry said, "Speaking from our experiences in Texas, Sam Staley and Adrian Moore get it right in Mobility First." World Bank urban planner Alain Bartaud called it "a must read for urban managers of large cities in the United States and around the world."

Moore is also co-author of Curb Rights: A Foundation for Free Enterprise in Urban Transit, published in 1997 by the Brookings Institution Press, as well as dozens of policy studies. His work has been published in the Wall Street Journal, Los Angeles Times, Boston Globe, Houston Chronicle, Atlanta Journal-Constitution, Orange County Register, as well as in, Public Policy and Management, Transportation Research Part A, Urban Affairs Review, Economic Affairs, and numerous other publications.

In 2002, Moore was awarded a World Outsourcing Achievement Award by PricewaterhouseCoopers and Michael F. Corbett & Associates Ltd. for his work showing governments how to use public-private partnerships and the private sector to save taxpayer money and improve the efficiency of their agencies.

Prior to joining Reason, Moore served 10 years in the Army on active duty and reserves. As an noncommissioned officer he was accepted to Officers Candidate School and commissioned as an Infantry officer. He served in posts in the United States and Germany and left the military as a Captain after commanding a Heavy Material Supply company.

Mr. Moore earned a Ph.D. in Economics from the University of California, Irvine. He holds a Master's in Economics from the University of California, Irvine and a Master's in History from California State University, Chico.