The Market Value of Public-Sector Pension Deficits

Retirement Policy Outlook, No. 1, p. 1, April 2010

8 Pages Posted: 26 Jan 2012

Date Written: April 1, 2010

Abstract

States report that their public-employee pensions are underfunded by a total of $438 billion, but a more accurate accounting demonstrates that they are actually underfunded by over $3 trillion. The accounting methods that states currently use to measure their liabilities assume plans can earn high investment without risk. Should plan assets fall short, as is likely, taxpayers are required to make up the difference. But the value of this taxpayer guarantee is not disclosed. As a result, while states recognize that their public-employee pensions are underfunded, the situation is far worse than their accounting demonstrates. Without taking proactive steps now, taxpayers will be made to cover an enormous shortfall when the bills come due.

Keywords: Public Pensions, State Employees, Retirement Policy

JEL Classification: H55

Suggested Citation

Biggs, Andrew G., The Market Value of Public-Sector Pension Deficits (April 1, 2010). Retirement Policy Outlook, No. 1, p. 1, April 2010. Available at SSRN: https://ssrn.com/abstract=1991361

Andrew G. Biggs (Contact Author)

American Enterprise Institute ( email )

1150 17th Street N.W.
Washington, DC 20036
United States
202-862-5841 (Phone)

HOME PAGE: http://www.aei.org

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