Pension Reform Newsletter: Using Marijuana Revenue to Pay Pension Debt, Pension Reforms in Florida and North Dakota, and More
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Pension Reform Newsletter

Pension Reform Newsletter: Using Marijuana Revenue to Pay Pension Debt, Pension Reforms in Florida and North Dakota, and More

Plus, analysis on the factors that impact state-level pension reforms and how to better protect public workers from retirement risks.

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 

  • Analyzing Florida’s Proposed Pension Reform
  • North Dakota Pension Reform Should Prioritize Paying Down Pension Debt
  • Recreational Marijuana Revenues Could Help Pension Solvency in Montana
  • What Factors Impact Pension Reform?
  • Protecting Public Workers from Retirement Risks
  • Alternative Assets and Pose Risks to Pension Systems

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

Articles, Research and Spotlights

Analysis of Florida’s Proposed Pension Reform

As Florida’s unfunded pension liabilities have grown to $36 billion, the debate over potential reforms to the Florida Retirement System (FRS) pension plan continues. Reason Foundation’s analysis finds that over the next eight years, FRS’ annual employer costs are estimated to rise by $2.3 billion, which is the same amount the state currently spends on highway and bridge construction each year. The pension reform currently under consideration in the state legislature would limit future accrual of pension debt by directing all new workers, except public safety workers, to the state’s existing defined contribution plan. Unfortunately, despite this proposed change, the legislation would leave FRS nearly as vulnerable to market stresses as it is now.

Testimony: Pension Reform in North Dakota Should Tackle Pension Debt, Funding Risks

In an effort to address the state’s growing public pension debt, the North Dakota legislature is considering reform to the North Dakota Public Employees Retirement System (NDPERS). As currently written, the legislation—Senate Bill 2046—would close the current defined benefit plan to most new workers, diverting them to the existing defined contribution plan. The reform would also include additional payments to cut down on the system’s growing debt. In testimony given to the House Government Affairs and Veterans Committee, and in a more detailed commentary, Reason’s Raheem Williams explains that while the reform would help the state by limiting financial risk and capping future liability accrual, more funding policy challenges would be needed to complete the job of putting NDPERS on a sustainable path.

Testimony: Using Marijuana Tax Revenue to Pay for Montana’s Unfunded Pension Liabilities

Earlier this month, the Montana legislature considered how revenues from the legalization of adult-use recreational marijuana could help fund the state’s retirement plans. Due to ongoing funding challenges, Montana’s two largest pension plans will likely not be able to rely on market returns to achieve full funding in the future. Reason’s Steven Gassenberger and Geoffrey Lawrence recently testified that tax revenues from legalized recreational marijuana sales could be appropriately directed as an ongoing payment for long-term pension liabilities.

What Factors Impact Public Pension Reform?

As state pension plan funding shortfalls and annual costs continue to grow, public pension reforms are becoming more common. While pension funding challenges are largely ubiquitous nationwide, some states have done more to address their public pension challenges than others. A new Reason Foundation policy brief by Grace College Professor Michael Bednarczuk, Ph.D., and Reason’s Jen Sidorova examines the factors that could encourage or stand in the way of pension reform across the states. The analysis finds that the variables with the largest positive effect on the likelihood of reform were passing a prior law or having nearby states pass reform. These findings reinforce the importance of continued, year-after-year efforts to fully address pension funding challenges.

Addressing the Retirement Risks Facing Today’s Public Workers

Pension Integrity Project senior fellows Rod Crane and Rich Hiller examine why many of the factors that affect an individual’s ability to have a financially secure retirement are not being considered by many state retirement plans. They emphasize the importance of accounting for all types of risk that both employers and members face in the design of public retirement plans. A clearer understanding of these risks could help policymakers build retirement options that better serve today’s employees, employers, and taxpayers.

Pension Plan Investments in Alternative Assets Can Pose Serious Risk to Taxpayers and Members

As returns from traditional investments in bonds and large-cap public equities have declined, public pension plans are increasingly moving towards greater allocations in “alternative assets,” such as private equity. These assets can potentially provide higher returns but also come with higher risk and volatility. Reason’s Steven Gassenberger warns about the growing use of private equity in pension fund investment, noting the high fees paid to many of these investment firms and the general lack of transparency involved in these types of investments.

News in Brief

Pension Contributions Continue to Grow

An update to NASRA’s annual brief on public pension contributions is now available with results through 2019. This analysis uses historic and current contributions from over 100 state and local pension plans around the country. They find that aggregate contributions in 2019 grew by 4.9 percent (from $116.6 billion to $121.9 billion) since the previous year. Annual contributions in the aggregate are still lagging behind actuarially determined rates, but plans have improved in this area over the past decade.

Do Smaller Public Employer Pensions Spur More Saving?

A new brief by the Center for Retirement Research argues that workers are unlikely to change their saving habits in response to lowered pension benefits. Laura Quinby and Geoffrey Sanzenbacher of the Center expand upon a recent study to investigate the relevance of a simple lifecycle model, which assumes that workers will respond to a one-dollar decrease in their pension benefit with a one-dollar increase in their supplemental saving. They find that the actual effect upon supplemental saving is small, potentially due to low levels of additional financial resources by workers.

Quotable Quotes on Pension Reform

“This is a financial problem that will not go away without legislative action…Now is the time to address ERS [Employees Retirement System] to illustrate that Texas can continue to be fiscally responsible with taxpayer funds by paying down existing debt to save on future interest payments.”

­—Texas State Sen. Joan Huffman, sponsor of Senate Bill 321, in an April 19 press release

“Had we paid our full pension (payment) every year between ’96 and this budget, the number I would have put up this year would have been $800 million. If you do the math, we are, in our [fiscal year 2022] budget, paying $5.6 billion, in one year’s budget, for the delinquency of the past 25 years.”

—New Jersey Gov. Phil Murphy quoted in “Murphy’s promise of full public-worker pension payment breaks 25 years of underfunding,” NJ Spotlight News, March 15, 2021

“Texas taxpayers will ultimately have to cover the fund’s liability. The failure to address this problem today means it will be even more expensive for taxpayers to fix in the future. Plus, unfunded pension funds can wreak havoc on the state’s bond rating, which increases the cost of borrowing and makes it more expensive to operate state government every day.”

—Richard Jankovsky, president of the Texas Department of Public Safety Officers Association, cited in “Texas’ public servants need a healthy retirement system,” Austin American-Statesman, April 3, 2021

“I think we need to look at…really incrementally decreasing that rate of return. What we end up doing are these large drops, which sort of cost a lot of money to do. We should really look at getting down and getting the pensions to 7 percent, or lower than that…From a dollar and cents standpoint, that big of a drop is very hard for the city to handle.”

—Mike Gormany, New Haven City budget director, cited in “City Plans $17.5M Pension Fix Start,” New Haven Independent, March 31, 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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