Pension Reform Newsletter — October 2018
ID 80936764 © Designer491 |

Pension Reform Newsletter

Pension Reform Newsletter — October 2018

Local struggles with growing pension costs, New Jersey pension funding pro-Trump tabloid, and more.

This newsletter from Reason’s Pension Integrity Project 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 

  • Local Struggles with Growing Pension Costs
  • How Pension Reform Affects Recruitment and Retention
  • CalPERS CEO Scandal a Distraction from Reform Efforts
  • New Jersey Pension Funding Pro-Trump Tabloid

News in Brief

Quotable Quotes on Pension Reform

Contact the Pension Reform Help Desk

Articles, Research & Spotlights

City Budgets Bend Under Growing Pension Costs, Shrinking Revenues

A new report from S&P Global Ratings illustrates a growing problem among municipal governments: 11 of the 15 largest U.S. cities have a pension obligation that surpasses all of their other debt obligations. Nationwide, pension costs are growing in many jurisdictions, which takes up more and more of a city’s annual budget. To make matters worse, several cities are reporting reductions in revenue, which makes it even more difficult to cover the rising costs of pensions. Reason’s Anil Niraula covers the findings of the S&P report and connects the expanding crowd-out problem to several struggling cities.


Reviewing Recent Research on How Pension Reform Affects Public Sector Recruitment and Retention

With the proliferation of pension challenges in the public sector, understanding the role that retirement benefits play in worker recruitment and retention is becoming ever more critical to policymakers. It is commonly believed that offering a pension is a major draw to people considering work in the public field, but very little is actually known about the effectiveness of offering a pension when it comes to bringing in and keeping talent. In a recent article, Reason’s Jen Sidorova reviews three studies that attempt to connect pensions to trends in public sector employment. After a thorough analysis, she finds that the studied relationship between these factors is tenuous at best.


Don’t Let CalPERS’ CEO Scandal Divert Attention from the System’s Accomplishments

The CEO of the nation’s largest pension plan, CalPERS, faces criticism from an emerging scandal based on questions about her original employment application. The negative publicity ought not to distract, however, from recent positive developments from CalPERS, which has established a more secure future for the public workers of California by adopting more responsible accounting and amortization policies. Reason’s Marc Joffe and Spence Purnell detail the developments for CalPERS’ leadership and describe several policy changes that have the retirement system moving in the right direction.


States Gambling on Riskier Assets in Chase for Pension Returns

Hoping to meet unrealistically high expectations for returns, New Jersey and many other states are increasingly making investments in risky assets like private equities and hedge funds. In this commentary, Reason’s Marc Joffe explains this expensive and risky strategy and offers the contrasting example of North Carolina, a state making strides in derisking their portfolio along with reducing spending on fees through the use of stock index funds.


News in Brief

New Data Details 2016 State Pension Investment Practices and Performance: The Pew Charitable Trusts has released data on pension fund investments updated for 2016 along with a policy brief detailing their findings. Using data from the country’s 73 largest state-managed pensions, Pew finds that funds have increased their allocation into riskier alternative investments, jumping up from 11% of total investments in 2006 to 26% in 2016. They calculate an average 10-year investment return of 5.5%, which is well below the average assumed return of 7.5%. The full brief and data are available here.

Brief Analyzes Three Decades of Employee Contributions to Pension Plans: In a newly released issue brief, the National Association of State Retirement Administrators (NASRA) analyzes employee contributions into public sector pensions and finds that since 1988, employee contributions made up 12% ($888 billion) of the total revenue for public pension funds, with employer contributions (26%) and investment earnings (62%) accounting for much larger shares of fund revenue. They find that more than 35 states saw an increase in employee contributions since 2009, leading to an increase in the median contribution for employees participating in social security from 5% in 2002 to 6% in 2017. The full brief is available here.

New Video by John Stossel Portrays Multiple Sides of Pension Crisis: City Journal’s Daniel Disalvo and Steven Malanga are featured alongside Steven Kreisberg of the American Federation of State, County, and Municipal Employees (AFSCME) in a new video about the growing pension crisis. The video gives a brief summary of the issues many states and municipalities face with growing pension debts. In his trademark quizzical style, Stossel gives a voice to the many sides of this pressing issue. The full video is available here.

Quotable Quotes on Pension Reform

“New Jersey made many questionable decisions over the past 21 years creating the current massive shortfall in unfunded pension liabilities. In the current year, $3.2 billion has been appropriated for pensions — that’s good — but still approximately 50 percent short of the required amount. The shortfall would be even larger if the state used a discount rate recommended by Moody’s Investor Service and every public finance expert. Unfortunately, because of poor policy choices New Jersey as well as other governments might very well need to rethink the size and scope of their pension systems and make significant changes.”

–Former New Jersey Budget Director and Comptroller Richard F. Keevey, “Opinion: Pension Discount Rate and Investment Rate are Not the Same Thing,” NJ Spotlight, October 3, 2018.

“What’s going on right now is there is a generation of taxpayers paying for the sins of the 1990’s…and because we are pretty much a property tax state, you feel it on your block.”

—Spokesman for New Hampshire Retirement System Marty Karlon, quoted in Dave Solomon, “$5B+ Public Pension Liability Nearly as Large as State’s Entire Annual Budget,” New Hampshire Union Leader, October 16, 2018.

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 or on Twitter @ReasonReform. As we continually strive to improve the publication, please feel free to send your questions, comments and suggestions to

Published by the Pension Integrity Project at Reason Foundation

Edited by Zachary Christensen, Policy Analyst, Reason Foundation

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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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