The Manhattan Institute just released a report on how pension costs are crowding out education spending. It is titled ‘Feeling the Squeeze‘ and fingers some novel villains:
Almost every state has experienced large pension cost increases, but eight states—Arizona, Colorado, Indiana, Michigan, North Carolina, Nevada, Texas, and Wisconsin—experienced the double whammy of declining per-pupil expenditures and growing pension contributions.
Where is New Jersey?
The American Legislative Exchange Council (ALEC) came out with a report this week based on reviewing the latest available actuarial valuations of over 280 state-administered pension plans and adjusting the discount rate from an average of 7.37% to a ‘riskless’ rate of of 2.344%.
I disagree with the methodology since I believe the funded status of a particular plan should be considered when adjusting the wishful discount rates that the plan actuaries who politicians hire are ‘encouraged’ to use. That is, a plan closer to full funding should be able to use a rate closer to that 7.37% while a pure pay-go plan (Puerto Rico) should use a rate closer to 0% since that is about what they are getting for the few days any money stays in the trust.
Nevertheless there were some nice charts ranking states by Funded Ratio, Unfunded Liabilities, and Unfunded Liabilities Per Capita. However, I did not see where they had the underlying data so, based on those charts, I decided to extract some other numbers.
A new study by S&P Global on the fiscal situation of the states included a handy chart on each state’s bond rating. As of Friday that chart is outdated.
Pension reform in Jacksonville has a long history which included a forensic investigation and this week:
Voters in Jacksonville, Fla., on Tuesday approved a referendum that creates a half-cent sales tax that will be used exclusively to fully fund the city’s three pension funds.
The vote came as a result of a state law passed earlier this year that allowed for the referendum, with the requirement that all three pension funds become closed to new employees and the employee contribution rate is increased to at least 10%. The pension funds are the general employees and corrections officer pension funds that make up the $2 billion Jacksonville City Retirement System and the $1.8 billion Jacksonville Police & Fire Pension Fund.
Since we are doing a comparison of public pension plans for major cities based on data from their actuarial reports, it’s time to turn to Jacksonville.
The Yankee Institute for Public Policy “develops and advances free-market, limited-government solutions in Connecticut” and today they focused on our blog entry on Teacher Pensions (for which I was interviewed) :
The Pew Charitable Trusts’ raw data is taken from the CAFRs of over 230 public pension plans comparing liabilities and assets (in thousands) by state. Five of those states happen to have liability amounts in the $190 billion range but when you look at the assets each has accumulated to pay those benefits a stark trichotomy emerges: