Do Public Pension Obligations Affect State Funding Costs?
34 Pages Posted: 11 Apr 2013 Last revised: 29 Oct 2014
Date Written: May 10, 2014
States’ unfunded pension obligations to their current and retired employees have exploded in recent years to levels that are estimated to be between $750 billion and $4.4 trillion. In theory, this massive debt should have implications for states’ ability to meet their financial obligations and a measurable impact on funding costs. Yet, we find no evidence that municipal bond markets are pricing the risks to states’ fiscal health arising from these large obligations.
Keywords: State pensions, unfunded obligations, municipal bond market
JEL Classification: H75
Suggested Citation: Suggested Citation