The Pew Charitable Trusts works on public pensions because pension obligations rank among the most significant fiscal challenges facing states and municipalities today. According to our most recent research, the gap between the total assets reported by state pension systems and the benefits they’ve promised is more than $1 trillion.
Some public plans are well-funded. But in other places, if changes are not made, retirees, workers, and taxpayers will be left with rising costs and unpaid promises for years to come. The most important task facing these states and cities is to pay down their existing pension debt in order to keep the promises made to their retirees and workers. And then they need to develop a sustainable system that helps them recruit tomorrow’s public sector employees.
Positive change requires good information, thoughtful debate, and a commitment to both fiscal sustainability and retirement security. Pew believes that pension reforms should be based on the facts and that every public employee — past, present, and future — deserves a secure retirement system. Having spent a decade on research and technical assistance, we know that there is no one-size-fits-all solution to the pension challenges faced by cities and states. Our work reflects these principles as well as a deep understanding of state and local government and respect for the people who make it work.
For example, last year in Alabama, Pew provided assistance to a joint legislative committee of the State Senate and House of Representatives examining potential reforms. After eight months of public hearings, the committee forwarded several proposals supported by Pew to the full Legislature to strengthen state fiscal health, increase retirement savings for workers at no cost to the state, raise the bar on investment transparency and governance, and take a closer look at strategies for providing and funding retiree health benefits.
In Connecticut, over the course of the last two years Pew has helped officials analyze various pension funding policies to address the state’s severe fiscal distress. Earlier this year, we testified before a legislative committee in support of an agreement between Governor Dannel P. Malloy (D) and the State Employees Bargaining Agent Coalition to restructure the state’s pension debt. The plan calls for a $2 billion increase in pension funding from the state over the next five years and adoption of a more conservative long-term assumption on investment returns in order to make costs more predictable.
Currently, Pew is working closely with legislators in South Carolina to address the state’s $20 billion unfunded pension liability. There, Pew has supported funding and governance policy reforms to pay down the existing pension debt, prioritize pension contributions in the budgeting process, and reduce the assumed rate of return on investments.
Pew is proud of its work on public pension systems and believes that all cities and states should seek to achieve an affordable and sustainable system that provides a path to retirement security for workers, protects taxpayers, and maintains governments’ ability to deliver important public services. Our project seeks to provide solid, useful information to help interested public retirement systems meet these goals.
Greg Mennis directs the public sector retirement systems project for The Pew Charitable Trusts.