Pension Reform News: Public pension bills in Texas, Alaska, Montana, and more
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Pension Reform Newsletter

Pension Reform News: Public pension bills in Texas, Alaska, Montana, and more

A move to undo pension reforms in Texas and Alaska, plus how pension costs crowd out other services.

This month’s 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 

  • Montana reforms would address pension funding challenges
  • Analysis compares defined benefit and defined contribution plans in Alaska
  • Houston needs to stay the course on pension reform
  • Texas considers reform of judges’ plan
  • Bill would expand investment risk for Texas’ teacher plan

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

Articles, Research & Spotlights

Montana Reform Would Improve Pension Funding and Retirement Savings for Public Employees

With more than $2 billion in unfunded pension liabilities, the Montana legislature is considering major pension reform that would address the main threats to the long-term fiscal health of the Public Employees Retirement System (PERS). House Bill 226 (HB 226) would first address the state’s pension obligations by improving the way annual payments are set, making contributions more reflexive to year-to-year needs. Second, the reform would make Montana’s defined contribution (DC) plan the default for new hires, reducing the likelihood of future unfunded liabilities while recalibrating the retirement plan to better fit the modern workforce. In this analysis, Reason’s Steven Gassenberger evaluates the potential long-term fiscal impact of HB 226 and the advantages new workers would enjoy with a more portable retirement benefit.

1-pager: Modernizing Montana’s Public Worker Retirement System

1-pager: Montana’s Default Retirement Benefit Option Should Serve Most Public Workers

Comparing Alaska’s Defined Benefit and Defined Contribution Retirement Plans 

Citing challenges with recruitment, Alaska policymakers are considering making defined benefit pensions available again to teachers, public safety, and other public workers. However, analysis of the current defined contribution (DC) plan reveals that few workers would be better off with the proposed defined benefit (DB) pension. The Pension Integrity Project at Reason Foundation released an interactive tool that displays the value of each type of benefit to Alaska workers at different points in their careers. Users can adjust several factors, such as entry age and expected investment returns, to see how Alaska’s DC and DB benefits compare in various situations. The results show that the current defined contribution plan is the optimal vehicle for retirement for most of Alaska’s public workers.

Commentary: A Return to Old-Fashioned Pensions Won’t Help Alaska Retain or Recruit Public Workers

Proposed Changes to Houston Fire and Police Pension Benefits Require Actuarial Analysis 

In 2017, Texas lawmakers approved a reform of Houston’s underfunded and increasingly expensive public pension for firefighters and police, making adjustments for new hires to manage runaway costs. Despite the plan not reaching full funding, state legislators are considering undoing that pension reform. In public comments to the Texas House Committee on Pensions, Investments, and Financial Services, Reason’s Steven Gassenberger warns of the potential costs of rolling back cost-saving reforms before they can achieve their long-term goals. Additionally, policymakers should not agree to benefit boosts without a clear understanding of the potential risks and costs that could be involved. A complete actuarial evaluation of the proposed reform rollback has not been provided in Houston, making it impossible for lawmakers to know the potential costs that this move could add to state budgets.

Retirement Reform Under Consideration for Texas Judges

Facing $95 million in unfunded pension liabilities owed to judges and looming insolvency, Texas lawmakers have proposed reform similar to what has been applied to the state’s larger general employee plan. House Bill 3367 and Senate Bill 1245 would create a cash balance plan for new entrants into the judges’ retirement plan, significantly reducing the risks of continued runaway pension debt costs. In public comments to the Texas House Committee on Pensions, Investments, and Financial Services, Gassenberger explains that these bills would be a prudent step in the state’s continued effort to live up to its promises to taxpayers and public workers.

Texas’ Teacher Plan Looking to Expand on Alternative Investments

Another piece of legislation under consideration in Texas would allow the Teacher Retirement System (TRS) to expand its investments into high-risk/high-reward alternative assets. This move reflects an ongoing trend in public pension systems. In efforts to keep up with overly optimistic market assumptions, many public pension systems are taking on higher levels of risk. In public comments, Gassenberger delineates the precautions Texas policymakers should take to adjust to the evolving investment strategies of public pension plans. First, plans should continue to reduce investment return assumptions to manage pressures to overextend in risk. Second, policymakers should require higher transparency in alternative investments through financial and cost reporting.

News in Brief

Study Demonstrates How Unfunded Pension Obligations Crowd Out Funding for Other Expenditures 

A newly published study examines how governments respond to the reporting of pension debt. Using four years of data from 432 counties across 45 states, the authors examined how governments changed spending decisions in response to new standardized pension reporting guidelines. Before new standardized reporting became required by the Government Accounting Standards Board Statement No. 68 (GASB 68), many smaller governments did not report on their public pension liabilities. With the new standards applied, the study’s authors found a noticeable change in spending patterns among the counties that reported their pension debt for the first time. In the years following the reporting standardization, these governments spent less on welfare, employment, and salaries, showing that pension costs crowded out spending in other areas. These results highlight the importance of reporting standards and their impact on policymakers’ decision-making. The full study is available here.

Quotable Quotes on Pension Reform 

“One factor that will continue to drive pension fund capital into private equity investments is relatively high assumed rates of return. …US state pension funds, on average, are assuming around 6.9% long-term investment returns, which is a considerably higher target than privately managed pension funds. In a search for yield, pension funds with a large funding shortfall and high investment-assumption target may decide they have few choices other than continue to chase a high-risk, high-reward strategy with their private capital investments.”

— Equable Institute Executive Director Anthony Randazzo in “US: Private equity losses weigh on pension funds,” IPE Magazine, April 2023.

“The public is who’s going to be holding the bag…When this shakes out, state governments and university endowments will either have to cut benefits or increase taxes or employee contributions.”

– Senior lecturer at the Johns Hopkins Carey Business School Jeffrey Hooke in “Private Equity May Be A Ticking Time Bomb For Public Pension PlansHuffPost, April 4, 2023.

Data Highlight

Each month we feature a pension-related chart or infographic of interest. This month, as noted above, analysts Truong Bui, Swaroop Bhagavatula, and Jordan Campbell created an interactive visualization of the retirement benefits earned by Alaska’s police, teachers, and other public workers. The analysis compares the benefits offered through the current DC plan to those offered in the currently closed DB plan.

Bar chart

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Contact the Pension Reform Help Desk

Reason Foundation’s Pension Reform Help Desk provides technical assistance 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

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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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