A growing chorus of credible voices across the political spectrum confirms that government employees’ defined benefit pensions are inherently flawed and cannot survive without drastic fundamental reform. The current government pension policy presents a systemic risk to the U.S. economy and, even under the most optimistic scenarios, will drain money from taxpayers and decimate essential government services. Read more
cri·sis noun \ˈkrī-səs\ an unstable or crucial time or state of affairs
in which a decisive change is impending; especially : one with the
distinct possibility of a highly undesirable outcome
The word “crisis” is getting a lot of airtime – but it is not related to the debt crisis, the obesity crisis, the healthcare crisis, the infrastructure crisis, or even the education crisis. Read more
The investment return assumptions of public retirement systems tend to be a bull’s eye for critics, drawing charges that the assumptions range from unrealistic to smoke and mirrors.
Public pension-fund financing uses nothing less than honest accounting. To say otherwise reflects either a lack of understanding of how these plans work or a separate agenda. Read more
For the past two years, some in the media have perpetuated the message that public pensions are running out of money – a Bloomberg editorial said so just this week, and countless other media outlets have also repeated this projection. The source of this striking prediction is usually Joshua Rauh, assistant professor of finance at Northwestern University.
He also advocated that failing public pensions could necessitate federal intervention, not once recognizing that states and localities were already in the process of making reforms.
Now it seems that Dr. Rauh is changing his tune. Read more
The Minneapolis Star Tribune recently ran two editorials giving a point / counterpoint on the state’s public pension system.
On one side is the Mark Haveman, executive director of the Minnesota Taxpayers Association, challenging the state pension plans’ investment return assumptions and the plans’ overall sustainability. Mr. Haveman writes:
While public pensions lack certainty, there’s no shortage of risk. Risk to public services, when pensions need more government resources. Risk to future taxpayers, as courts have consistently ruled that benefits promised under these plans must be paid. Risk to current public employees, as higher contributions eat into take-home pay even as the long-term sustainability of today’s benefit levels becomes more doubtful.
On the other side are the board chairs of the three statewide systems: Thomas Marshall, Mary Benner, and Martha Lee Zins. Following is their response in its entirety, re-printed with permission from the authors.