We help policymakers address public pension shortfalls through pro-bono consulting and independent actuarial analysis.
Pension shortfalls are the most foreseeable crisis you could imagine, yet reform is seen as too difficult, so the problem is put off and ignored.
But ignoring the need for reform can be disastrous, resulting in spiraling pension debt compromising public services, fiscal distress, and threats to retirement security in your state or local government.
So why do public pension problems go unsolved?
Confusing, Unreliable Data
Pension data are overwhelming if you don’t already understand how your pension system works.
Reform is further stymied by the lack of reliable numbers. Projections are only as good as the assumptions they’re based on. Too often the retirement system’s own numbers fail to make realistic assumptions regarding investment returns, costs, risk, and demographic and economic trends.
Lawmakers are further frustrated by not knowing what options for reform are available.
Pension boards and actuaries present reform plans that are politically unpopular, financially infeasible, or insufficient to meet the scale of the problem.
Lack of Legislative Support
Even when legislators have reliable numbers and understand their options, their colleagues might not understand that there’s a problem at all.
Unless a critical mass of legislators understand the issue, it won’t be made a priority.
Lack of Stakeholder Support
Without a shared understanding of the problem, stakeholders are opposed to even talking about pensions.
They fear that reformers are anti-worker and that they’ll lose the retirement benefits they’ve been promised.
What if you could change this dynamic?
- What if you could honor 100% of the benefits earned and accrued in a way that fit within the needs of your state budget?
- What if you had data and analysis you could trust from independent actuaries and financial analysts who could work through every scenario with you?
- What if you had a broad menu of reform options, not just plans based on false assumptions or ideological pre-commitments?
- How much farther could you take your reform effort if you understood the issue better and so did your colleagues?
- What would reform look like if it were supported by members of both parties and stakeholders in the pensions system?
Education & expertise can make
Get a handle on the numbers
Reason’s Pension Integrity Project team can help you get a handle on the numbers. Using our actuarial modeling and quantitative analysis, we’ll dissect the problem, validate projections from pension plans or alternatives assembled by stakeholders. We’ll provide projections based on the cost, return, and risk assumptions you think are the most reasonable.
Explore all possible options
We’ll review all available options and work with you to find the approach that’s most viable.
We never push a single, cookie cutter approach. We offer a menu of ideas and options and then work with policymakers and stakeholders to craft custom solutions that fit their pension systems and budgets.
Our role is strictly advisory. It’s our job to know if the pension math adds up. It’s your job to know if the votes will add up.
Become a policy expert, teach others
As we review options together, you’ll gain a firmer understanding of the mechanics behind your pension system. Your office will become its own pension policy think tank.
We’ll also work with you to educate your fellow policymakers. No amount of meetings or presentations are too much. We’ll meet with an entire caucus, testify at a committee hearing, or speak with legislators one-on-one.
Whatever it takes to make the pension problem easier to understand so that a vote for reform can be cast with confidence.
Promote a common understanding
Just as with lawmakers, reform needs to be understood by stakeholders in order for them to support it.
We’ll meet with stakeholders and demonstrate how reform is about long-term stability and keeping promises—that’s a goal everyone can agree on.
We’ll work to educate stakeholders on the options available, the trade-offs involved with each, and the best way to achieve long-term pension health.
Avoid shortfalls & trade-offs
The result? We’ll help you find a way to pay down pension liabilities and stabilize your system without hurting taxpayers or sacrificing state services.
A Record of Results
“With Reason’s help, we avoided the kinds of conflict that so often accompany pension reform efforts across the nation. Your team’s work made all the difference in our success.”
“The accurate and comprehensive financial data we got from Reason was the first sign that I could rely on them as a resource. As we delved deeper into the pension problem in Michigan, we leaned on Reason’s expertise. Their understanding of how the plan had operated over the last 30 years helped us tailor a solution to make our existing plan stronger while building a parallel track for new employees.”
“Reason wasn’t just competent on the pension issue, they knew how to speak everyone’s language. People had misgivings about working with a libertarian organization, but Reason’s approach wasn’t ideological—they recognized what we were trying to do in Arizona and won people over. They committed to educating everyone involved, both at large meetings and one-on-one. The result was one of Arizona’s greatest legislative successes of the past 40 years.”
“Just as amazing as the scope of Arizona’s reform was the way in which it was achieved. It passed overwhelmingly in the state House and unanimously in the Senate after a year-long collaborative process that involved lawmakers, public safety unions and the Reason Foundation, a libertarian think tank…Arizona’s paradigm-buster may not be achievable everywhere, but it does offer an approach that some could use to make real progress on a problem that often seems intractable and will only get worse if it isn’t addressed.”
“State Sen. Debbie Lesko mother-henned an impossibly broad coalition to explore solutions, including pension experts at the libertarian Reason Foundation. And the coalition improbably produced a consensus . . . public employee unions and libertarian wonks blazed new ground on a difficult and emotional topic that is producing paralysis around the country.”
“They’re very common sense, very pragmatic. Not only did they offer advice and consultation to me, they also met with other members. And Reason’s quantitative analysis made it clear that we didn’t have to make the large upfront contributions that were initially proposed, which made passing our reform much easier.”
“Reason’s team came to the capitol and met with members of the legislature, legislative staff, and the audit division. Those meetings were quite beneficial. They opened a lot of eyes and brought in members of both parties. Once people were up to speed, they were less hesitant consider a change.”
“Reason may be viewed as right-leaning, but they aren’t political. Their mission is non-partisan. During our reform process, Reason was on the ground reaching out to as many legislators as possible, providing assurance that we were pursuing a solvent plan. During the push and pull of negotiation, no matter who presented an idea, Reason could validate it and provide independent, expert advice. That helped us push to pay down liabilities and build solvency of the plan into law.”
Aren’t the upfront costs too high?
One of the reasons we have unfunded pension liabilities today is that we’ve avoided paying the true costs of providing the benefits promised to generations of public workers. This means that sponsoring governments need to find ways of directing additional resources to pensions in the coming years. Thankfully, most governments have some flexibility on the timing and method of how that’s achieved. That gives policymakers and stakeholders the opportunity to craft custom solutions to effectively manage costs while better managing pension debt. And it’s important to remember the one thing we know for certain: pension math is non-negotiable, and in the long run the most expensive option is doing nothing.
Would making changes to the plan take benefits away from current workers or retirees?
An important guiding principle for all pension reform should be ensuring that 100% of benefits earned and accrued by active workers and retirees are met. If policymakers consider introducing alternative retirement plans for newly hired workers, those designs can and should be designed so they do not impact active worker or retiree benefits. Reforms must ensure that legacy unfunded liabilities continue to be paid off as fast, if not faster, then they were otherwise planned to be.
Won’t these plans just slide back into insolvency?
To avoid falling short of the goal of improving pension solvency, it’s important to avoid the temptation of adopting half-measures in the interest of political expediency. Instead, policymakers should build a holistic, targeted reform—either at once or in multiple phases—that addresses pension funding policy, amortization methods, design vulnerabilities, actuarial and demographic assumptions, and governance. There is usually never one driver of unfunded liabilities. Accordingly, reforms need to be multifaceted to be most effective.
Reason’s commonsense approach
Unlike other think tanks or policy experts, we’re not committed to a one-size-fits all solution. Instead, we’re committed to a commonsense set of principles, namely:
- Keeping Promises: Ensure the ability to pay 100% of the benefits earned and accrued by active workers and retirees
- Retirement Security: Provide retirement security for all current and future employees
- Predictability: Stabilize contribution rates for the long-term
- Risk Reduction: Reduce pension system exposure to financial risk and market volatility
- Affordability: Reduce long-term costs for employers/taxpayers and employees
- Attractive Benefits: Ensure the ability to recruit 21st Century employees
- Good Governance: Adopt best practices for board organization, investment management, and financial reporting
We understand the pension reform process from all sides of the problem. Members of our team have worked as public employees, served on pension boards, and have been part of past reform efforts within state legislatures.
We’re booking consultations now
We’re currently scheduling consultations for the 2021 legislative session. Contact us now to ensure availability.
Take the next step toward reform
Sign-up below to schedule an initial consultation with our team of pension reform experts.
We can help you make sense of the data, explore reform options, and discuss ways that Reason can help to educate policymakers and stakeholders in your state.