Pension Reform Newsletter: Market Volatility Impacts Teachers’ Pensions, Cost-of-Living Adjustments During COVID-19, and More
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Pension Reform Newsletter

Pension Reform Newsletter: Market Volatility Impacts Teachers’ Pensions, Cost-of-Living Adjustments During COVID-19, and More

Plus: Pension shortfalls increase challenges for Mississippi, bracing for bad pension news in Florida, 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 Analysis of Challenges Facing Mississippi’s Pension Plan
    • New Data Tool: Teacher Pensions in Time of Market Volatility
    • Florida Is Not in a Position to Boast About Pension Funding
    • Cost-of-Living Adjustments During COVID-19 and Beyond
    • Can Public Pensions Invest Their Way Out of Underfunding?

News in Brief

Quotable Quotes on Pension Reform

Data Visualization Highlight

Contact the Pension Reform Help Desk

Articles, Research & Spotlights

Pension Shortfalls Present Increasing Challenges for Mississippi’s Pension Plan

The Public Employees’ Retirement System of Mississippi (MPERS) has amassed $18 billion in unfunded pension liabilities, leaving it with only 61 percent of the assets needed to pay promised benefits in full. This analysis, produced by the Pension Integrity Project at Reason Foundation, examines the structural problems within MPERS that are contributing to rising pension costs and state budget crowd-out. The analysis looks at the primary factors driving MPERS’ unfunded liabilities over the past few decades and offers a stress testing analysis designed to highlight potentially latent financial risks.
» Webinar: The Declining Health of Mississippi’s Pension System

How Market Volatility Could Impact Teacher Pension Plans 

Despite growing education budgets before the pandemic, teachers across the nation have experienced stagnant wage growth and shrinking resources, largely due to the increasing costs of providing teacher pension plans. The fiscal impact the pandemic and recession are having on state budgets is a significant threat to the salaries and retirement security of teachers, many of who participate in public pension systems that have over $688 billion in debt nationwide. Reason Foundation has released a new tool to help preview the potential impact that market volatility may have upon teacher-specific pension plans across the nation. 

Instead of Boasting, Florida Should Be Bracing for Bad Pension News and More Debt

As states differ in their abilities to handle the economic challenges associated with the coronavirus pandemic, last month Sen. Rick Scott (R-FL) boasted about the fiscal condition of the Florida Retirement System (FRS). In a Wall Street Journal op-ed, Sen. Scott claimed that FRS is “well-positioned to address the coming shortfall in state revenue without a bailout.” Reason’s Raheem Williams examines this claim and notes that, while FRS is better-funded than some states like Illinois, Florida’s pension plan is already underfunded by $23.6 billion and requires further reforms for true sustainability. 

Making Cost of Living Adjustments to Public Pensions During the Coronavirus Pandemic and Beyond

Cost-of-living adjustments (COLAs) are geared to protect the pension benefits of retirees from inflation, but many public plans provide adjustments that go well beyond the original purpose of this benefit. In this commentary, Reason’s Marc Joffe evaluates common methods for determining a retiree’s COLA, finding that several states use rates well above the rates of inflation experienced over the past few decades, which adds significant costs to already struggling pension systems.

Are Public Pension Plans Going to Be Able To Invest Their Way Out of Financial Losses, Unfunded Liabilities?

Despite the fiscal chaos spurred by the economic effects of the coronavirus pandemic and recession, many plan directors are reassuring their stakeholders of the security of their plans because they are “long term investors.” Reason’s Jen Sidorova examines recent statements from plan managers who explain their strategies for recovering from a financial crisis, noting the importance of moving away from a reliance on investments to reach full funding and the need for reforms that create a more resilient pension system.

News in Brief

Building Better Retirement Systems Amid a Global Pandemic

The coronavirus pandemic has damaged pension plans across the world. In the U.S., Professor Olivia Mitchell of the Wharton School of the University of Pennsylvania estimates average plan funded levels have dropped 15 percent directly from the COVID shock. In the Netherlands, long considered the best-funded in the world, plans fell from a 105 percent funding rate to 70 percent. Professor Mitchell examines the ways in which pension plans have reacted to the shock, and evaluates various insurance and financial market products that may grant resiliency to pension plans. 

Recession and Market Decline’s Impact on Public Pension Plans

While projecting the impact from the economic effects of the coronavirus upon state pension plans has been challenging, promising signs forecast a recovery that could potentially be less extreme than the impact of previous recessions. In a new brief, the National Association of State Retirement Administrators argues that due to the structural differences in market shocks, the 2020 recession will not be as severe. They note, however, that 2020 budget pressures are likely to result in some governments paying below actuarially determined contributions, which will result in further growth in unfunded liabilities. 

Pew Releases Latest State Pension Funding Gap Report

Despite a historic bull run in the stock markets, many pension plans continued to experience growth in their liabilities throughout the past decade, leading to a total of $1.24 trillion in debt by the end of the 2018 fiscal year, according to the latest in an annual series of reports from the Pew Charitable Trusts.  

Quotable Quotes on Pension Reform

“[E]ven before the pandemic, we knew that our goal of achieving a risk-adjusted return of 7 percent would require addressing the market’s triple threat of low interest rates, high asset valuation and low economic growth.”
—California Public Employees’ Retirement System Chief Investment Officer Ben Meng, quoted in “CalPERS Prepares for the Long Haul,” The Wall Street Journal, June 14, 2020.

“This is a critical time for us. When we look at the revenues we’re losing because of COVID, where is the revenue going to come from? What we’re talking about is unsustainable. We’re back to putting the money into pensions, not putting the money into classrooms.”
—Alberta Darling, Wisconsin State Senator and Senate Co-Chair of the Joint Committee on Finance, quoted in “Milwaukee Public Schools’ $90 million Retirement Sweetener ‘Unsustainable’,” MacIver Institute, June 9, 2020

“We’re a global investor and we assess risk globally. One of the things we always assess is political risk…but it has become even more difficult to assess now.”
—Theresa Whitmarsh, Washington State Investment Board Executive Director, quoted in “State Actuary: Pay Now or Later for Obligations,The Lens, June 17, 2020

“You’re gonna pay me now or you’re going to pay me later. And it’s going to be more if you pay me later.”
—Tim O’Brien, Colorado Public Employees’ Retirement Association Board Chairman, quoted in “Before coronavirus, PERA had one of its best years in decades. Here are 3 concerns going forward,Colorado Sun, June 22, 2020

 “That negative cash flow situation that we’re in, combined with the volatility of the market, really has a significant drag on the accumulation of assets over time.”
—Ryan Falls, Pension Consultant, speaking to Employees’ Retirement System of Texas’ Board of Trustees at 1:22:30, May 20, 2020 

Data Visualization Highlight

Each month we feature a pension-related chart or infographic of interest curated by one of our Pension Integrity Project analysts. This month, Truong Bui expands on a previous tool to examine the funding history and the impact 2020 returns will have on the pension systems serving K-12 public teachers. Choose and view your state here

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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