In This Issue:
Articles, Research & Spotlights
- California Legislature Passes Pension Increase for Police and Fire
- Evaluation Identifies Opportunities for Reform of Texas Pensions
- Allegheny County, Penn., Debates Causes of Pension Debt
- How to Insulate Pensions from Political Temptations
News in Brief
Quotable Quotes on Pension Reform
Reason Foundation in the News
Articles, Research & Spotlights
California Undermines Pension Reforms with Benefit Boost for First Responders
The California legislature passed Assembly Bill 1383, which would roll back key cost-saving provisions of the bipartisan 2012 Public Employees’ Pension Reform Act (PEPRA). If Gov. Gavin Newsom’s signs AB 1383, it would lower the retirement age for police and firefighters from 57 to 55 and loosen the cost-saving salary caps used to calculate pension benefits. Backers of the pension increase claim there’s a growing recruitment and retention crisis, despite evidence to the contrary. Responding to warnings about the bill’s potential costs from the Reason Foundation and other stakeholders, its sponsors accepted a last-second amendment to trim the price tag slightly. Reason Foundation’s updated analysis indicates the late change reduced the bill’s 30-year estimated cost from $14.5 billion to $11.8 billion. Considering that the California Public Employees’ Retirement System (CalPERS) is still $179 billion short of fully funding benefits already promised, now is not the time to pile on more expensive pension promises for influential public employee groups that taxpayers and local governments will have to pay.
Funding Fixes Needed for Texas’ Teacher Pension
In testimony to the Texas House Committee on Pensions, Investment, and Financial Services, Reason Foundation’s Steven Gassenberger explained that the Teacher Retirement System of Texas (TRS) has accumulated $70.3 billion in net pension debt since 2001, primarily because contribution rates are fixed in statute and do not adjust automatically according to actuarial standards. Current state and employer contributions of 9.37% of payroll fall short of the 10.87% TRS recommends, adding to TRS’ shortfall, which is projected to reach $74.1 billion by 2038 and, without further fixes, to remain a burden on employers and taxpayers until 2060. For solutions, lawmakers should look to the Employee Retirement System of Texas, which has greatly improved its funding after comprehensive reforms in 2021.
Allegheny County Pension Blame Game Obscures Path to Solution
Despite several accusations of blame over a $1.43 billion pension funding shortfall in Allegheny, Penn., analysis of financial reports points to several contributing factors behind the county’s funded status of under 40%. According to an op-ed in the Tribune-Review by Reason Foundation’s Leonard Gilroy and Jordan Campbell, changes to actuarial assumptions, insufficient contributions, and investment returns below expectations all added hundreds of millions to the current situation, which should guide policymakers in formulating a comprehensive solution. Eliminating this debt on promised benefits will require identifying additional sources for funding, but taxpayers shouldn’t be asked to shoulder more until officials demonstrate they will address what caused the shortfall by offering new hires cost-effective, sustainable benefits such as a hybrid or pure defined-contribution plan, as Pennsylvania did a decade ago.
As ongoing efforts to undermine reforms across the country show, state and local defined benefit pension plans are structurally vulnerable to politics in ways private-sector plans are not. Reason Foundation’s Rod Crane catalogs these gaps by contrasting public pensions with the federal Employee Retirement Income Security Act (ERISA) framework that regulates private-sector pensions. Pension plans for government workers generally face no legally enforceable requirement on adequate contributions, can grant benefit sweeteners even when already underfunded, see court rulings that frequently lock in benefit structures for an employee’s whole career, see lawmakers that rarely set risk parameters for their fiduciary boards, and see boards that can drift toward non-financial or politically driven investment agendas. Crane offers a framework of reforms and examples of success in insulating public pensions from their inherent political vulnerabilities, including laws requiring adequate contributions, benefit adjustments tied to funding metrics, and statutory authority to adjust benefits for future service.
News in Brief
New Research Finds Pension Boards’ Rush into Alternatives Was a Belief Shift, Not Desperation
A brief from the Center for Retirement Research at Boston College analyzes why public pensions have moved so aggressively into private equity, real estate, and hedge funds, with alternatives climbing from 14% to 39% of pension systems’ asset holdings from 2001 to 2021. The paper finds that funding levels, return targets, and membership age profiles had little to do with how far a plan shifted into alternatives. The paper found that in 99% of tested scenarios, no plausible change in risk appetite alone could produce the shift observed. This interpretation undercuts the popular assumption that the shift to alternatives has been driven by the need for aggressive returns to meet unrealistic return expectations. Rather, the shift can be credited to a genuine change in what plan managers believed alternatives would return relative to public equities, largely shaped by geographic peer effects, the study finds. Read the full report here.
Quotable Pension Quotes
“We want to pay our police and fire and all our employees all we can, but it has to pencil out at the end.”
––Napa Mayor and retired Napa firefighter Scott Sedgley in “Lawmakers vote to let first responders retire earlier and with more money. Will Newsom sign on?” CalMatters, Aug. 30, 2026.
“To think that an employee is going to gut out 20 years or more at a job that mandates overtime and does not pay well relative to jobs with significantly less risk for a pension alone is an oversimplification.”
––State Sen. Thomas Albert (R-Lowell) on Michigan’s revived corrections-officer pension bill in “Michigan Senate passes nine vetoed bills,” 89.1 WEMU, Sept. 11, 2026.
Reason Foundation in the News
Reason Foundation’s Annual Pension Solvency and Performance Report was cited in “California’s Billion-Dollar Union Machine,” in an op-ed in the New York Post and City Journal.
Reason Foundation and Mariana Trujillo’s analysis on AB 1383 was cited by the Orange County Register Editorial Board in “AB 1383 Is a Slippery Slope to Another Pension Tsunami,” in Rafael Perez’s Orange County Register opinion piece “Jeff Gonzalez Flipped a Blue Assembly Seat. Has He Earned Another Term?” and “Democrats Are Undoing California’s Pension Reforms. Why Are Republicans Going Along with It?” by columnist Steven Greenhut.
Reason Foundation’s Leonard Gilroy was quoted in The Center Square’s piece, “Amid Poor Investments, Allegheny County Mulls Taxes.”