Thursday, October 14, 2010

Talking about public sector pensions

Over at The Atlantic, I'm interviewed regarding public sector pension financing. The short story:

What's the problem with these state and local pension programs?

There are two problems. First, they're underfunded. They only have about 75% of the money needed to pay liabilities. They need more money from either employee contributions or general taxes [employer contributions].

Second, states' accounting standards are inappropriate. They assume they can earn high returns on stocks and private equity investment without market risk. If the risky assets fail, the taxpayers have to pay the difference.

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