Will Public Pensions Run Out of Money?

A recent issue brief published by the Center for Retirement Research (CRR) at Boston College, “How Would GASB Proposals Affect Public Pension Funding Levels?,” has created some stir – and is being cited – for its inclusion of the “run-out dates” for 126 public pension plans.

Third Quarter Assets Decline—A Snapshot in Time

Driven largely by the decreases in corporate stocks and interna­tional securities, the U.S. Census reports that the value of investments held by 100 of the largest U.S. public-employee retirement systems fell in the third quarter of 2011. Total holdings and investments quarter-to-quarter decreased $236.6 billion, or 8.5 percent, to $2.5 trillion.

This news is no surprise to anyone who has even half-listened to the daily, or weekly, gyrations of the stock market. However, performance in one quarter—especially following a trend of increases for five consecutive quarters—is not as worrisome as some may think.

Public Pension Investment Returns and Market Volatility

For fiscal year ending June 30, 2011, state and local government retirement systems had a median investment return of 21.6 percent.

That statement is often followed by “but…” as in “but look what’s happened to the markets since then!” 

With a slow economic recovery and ongoing global market volatility, the fact remains that taking a long-term focus is an overarching factor in public pension investment strategies and projections.

Differing Opinions on Whether State Pension Problems are a “Big Deal” – but Why Refuse to Engage?

On September 2, 2011, Josh Rauh of Northwestern University posted a blog entitled “Are State Pension Problems a ‘Big Deal’?” He states this question was asked by a colleague given that pension contributions account for 3.8% of state and local spending.

A Macro View of Public Pension Assets

We’ve all heard the comment: public pension unfunded liabilities represent a “trillion dollar gap” and growing.

That unfounded statement considers the grand total of every system’s liability even though the actual liabilities vary dramatically due to multiple factors.

So while neither do assets all fall into one big pot, what do you get if you were to lump them together?