Can a Pension Plan File for Bankruptcy?
The news on April 19 included the headline, “In apparent first, a public pension plan files for bankruptcy.” That got our attention. Read more
Where Does My Pension Money Go?
An article in Sunday’s New York Times, “Pensions Find Riskier Funds Fail to Pay Off” by Julie Creswell, focuses on alternatives, pointing out that public pension funds that have made larger allocations to this asset class have the same—or in some cases, lower—returns as pension funds with little or no allocation to alternatives. Meanwhile, since alternatives usually cost more to manage, some funds have spent more in asset management fees than others, yet, according to Creswell, don’t have the returns to justify the added expense.
The chief problem with the article is that it indiscriminately treats these alternatives as a monolithic asset class. And this is misleading as there are big differences between and among the components that comprise the asset class known as alternatives: hedge funds, private equities, and real estate. These differences include variations in historic and projected returns, risk levels, correlation with other asset classes, and others. Read more 
Grading the Integrity Report
When states buy goods and services, invest their employees’ pensions, hire and fire civil servants, appoint people to regulatory positions, and enforce laws, a system of policies and practices with high integrity is key to serving the interests of people.
It’s a strong and worthy premise, and the State Integrity Investigation’s goal to “inspire policy changes to promote good government practices” is worthy of endorsement.
The investigation is coherent, and as a whole substantial with its analysis of some 16,000 data points. But in the public pension category, the investigation itself didn’t make the grade. Read more
Facts and Data That Tell the Pension Story
Two notable reports on public pensions were published this past week: the National Institute on Retirement Security (NIRS) released an updated economic impact study: “Pensionomics 2012: Measuring the Economic Impact of DB Pension Expenditures,” and the U.S. Government Accountability Office (GAO) issued “State and Local Government Pension Plans: Economic Downturn Spurs Efforts to Address Costs and Sustainability.”
These studies offer significant data and insight on public pensions and are recommended reading in their entirety. They are also a reminder of how facts and data, not rhetoric, are needed to shape policy decisions and potential reforms. While there are several items to focus on in these reports, here are the two which have gotten the most play. Read more
The Cost of Pensions
On a nationwide basis, pension costs for state and local governments are roughly three percent of total spending. According to data from the U.S. Census Bureau, pension costs since 1980 have been reliably stable, averaging from around four to three percent. Read more