Pension Reform Newsletter: Houston pension system moves into crypto investing, California pension spiking, and more.
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Pension Reform Newsletter

Pension Reform Newsletter: Houston pension system moves into crypto investing, California pension spiking, and more.

Plus: How pension funding can impact K-12 education inequalities, New York teachers' pension plan lowers investment expectations, and more.

This newsletter from the Pension Integrity Project at Reason Foundation highlights articles, research, opinion, and other information related to public pension challenges and reform efforts across the nation. You can find previous editions here.

In This Issue:

Articles, Research & Spotlights 

  • New York Teachers’ Plan Adjusts Investment Assumptions
  • Houston Pension System Looks to Invest in Cryptocurrency
  • A California City is Caught up in Pension Fraud Investigations
  • Public Employers Need Updated Retirement Offerings to Improve Retention

News in Brief
Quotable Quotes on Pension Reform
Contact the Pension Reform Help Desk

Articles, Research & Spotlights

New York Teachers’ Pension Plan Lowers Investment Expectations

On the heels of record investment returns in 2021, many public pension plans are still expecting muted market returns over the next few decades and are appropriately reducing actuarial assumptions to better prepare their funds for this future. New York State’s teacher pension plan made this move in November, adjusting their assumed rate of return down from 7.1% to 6.95%. Reason’s Jen Sidorova notes that this decision is in line with the state’s other major pension plan—which made an even bolder investment adjustment earlier this year—and likely marks the first group of many plans that will eventually bring assumptions down below 7%.

Houston Firefighter Pension Plan Makes a Bold Move Into Cryptocurrency Investing

The Houston Firefighters’ Relief & Retirement Fund (HFRRF) made headlines in October for being among the first public pension plans to invest in cryptocurrencies. Houston’s crypto investments are expected to be just a minor share of their total portfolio, but this could mark a growing trend among institutional investors. As Reason’s Marc Joffe explains, these investments will bring several significant and unique risks, but could also prove to be an effective hedge during periods of high inflation.

CalPERS Audit Finds History of Fraud and Pension Spiking in Broadmoor Police Department

The small, unincorporated town of Broadmoor, California has allegedly become a destination for senior police officials to commit pension spiking. According to the results of a newly released audit from the California Public Employee Retirement System (CalPERS), three Broadmoor police chiefs and one retired commander were considered “unlawfully employed” and therefore received improper payments from the pension fund in the last decade. Reason’s Ryan Frost explains how these payments will impact the township and its taxpayers.

Outdated Retirement Benefits Could Be Contributing to Public Employee Hiring Issues

The pandemic has ushered in several new challenges for public employers. State and local governments have struggled with recruitments for years, and now many have also seen waves of early retirements over the last two years. In this commentary, Reason’s Steven Gassenberger suggests that public employers address this growing challenge by offering a wider range of attractive retirement options for new potential workers. The traditional defined benefit pension plan may be a good recruitment tool for some, but ignores the growing number of employees who are seeking more flexible and portable retirement options.

News in Brief

Report Examines How Flawed Funding Policies Exacerbate Inequalities in Connecticut School Districts

While most states manage a retirement system for their employees, funding and contribution policies can differ greatly. In states like Connecticut, city and county governments make no contributions toward promised benefits, meaning the state covers the tab entirely. A new report from Equable Institute and Education Reform Now Connecticut measures how the state’s contributions—or subsidies—vary per pupil for each district. The analysis finds that this practice has generated inequities between school districts, with the state dedicating proportionally more taxpayer money to well-off areas and less to areas with lower resources. The full report is available here.

New CDC Data Brief Shows Life Expectancy fell almost 2 years in 2020

New mortality data released by the National Center for Health Statistics show that the average life expectancy decreased 1.8 years in 2020, marking the largest single-year decline in 75 years. Life expectancy for men fell 2.1 years, from 76.3 to 74.2, while life expectancy for women fell 1.5 years, from 81.4 to 79.9. Heart disease and cancer continued to lead the pack with over 600,000 deaths each, but COVID-19 ranked as the third leading cause of death with more than 350,000 fatalities. Mortality is a key component in the accounting of a pension benefit – lower life expectancies mean fewer benefits need to be paid from the pension fund. The full report is available here.

Quotable Quotes on Pension Reform

“Most people think that adding leverage increases returns, and that is a mistake…Put as simply as possible: If you invest in AAA bonds, let’s say you receive 2 percent for sure. If you lever up an equity portfolio, [you may, let’s say,] have a 50 percent chance of receiving 20 percent and a 50 percent chance of losing 10 percent. The expected return is higher in this example, but you don’t receive the expected return, [and] this is where the mistake is: You either win a lot more or lose a lot more. If you are a pension fund and increase leverage, you are doing the latter — i.e. basically betting the house. You are taking the risk of losing a lot of money because you want to have a chance to become solvent.”

—Financial Economist and Researcher Ludovic Phalippou on leveraging strategies employed by public pensions, cited in “CalPERS is Turning to Private Equity and Leverage to Boost Returns and Reduce Risk. Will It Work?,” Institutional Investor, Dec. 6, 2021

“If we do nothing now, it will mean even greater and harder benefit cuts down the road as the unfunded liabilities continue to mount. Today’s $5.6-billion-plus unfunded liability will look like chump change if we continue to kick the can down the road. If we don’t have these serious conversations now, it means much more difficult conversations in three, five, or ten years from now when the crisis has exploded. We can’t delay the conversation any longer. Unless the latest task force has the courage to propose real solutions that make meaningful changes in the state’s pension system, the costs will only grow exponentially to a point where we simply cannot afford them.”

—Ethan Allen Institute Policy Analyst David Flemming on the need for reforms to the Vermont State Employees and State Teachers pension systems, cited in “David Flemming: The consequences of doing nothing about pensions,” VTDigger, Dec. 13, 2021

Contact the Pension Reform Help Desk

Reason Foundation’s Pension Reform Help Desk provides information on Reason’s work on pension reform and resources for those wishing to pursue pension reform in their states, counties, and cities. Feel free to contact the Reason Pension Reform Help Desk by e-mail at

Follow the discussion on pensions and other governmental reforms at Reason Foundation’s website and on Twitter @ReasonPensions. As we continually strive to improve the publication, please feel free to send your questions, comments, and suggestions to

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Reason Foundation’s Pension Integrity Project has helped policymakers in states like Arizona, Colorado, Michigan, and Montana implement substantive pension reforms. Our monthly newsletter highlights the latest actuarial analysis and policy insights from our team.

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