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The Funding Status of Teacher Pensions: An Econometric Approach

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  • Robert P. Inman
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    Abstract

    The financing of public employee pensions has become an issue of growing public concern. This paper examines the fundinq status of teacher pension plans for the fifty states and for selected localities for the decade, 1971-1980. A pension underfunding equation based upon actuarial principles is specified and estimated using a sample of pension plans for which actuarially sound measures of underfundings are available. The ecometrically-estimated pension equationis then used to "predict" underfundings for each state and local pension plan for each year for which full pension plan data are available. The results reveal that the real dollar value of plan underfundings has risen by over 50% in the average state from 1971-1980. Strategies for funding these growing pension deficits are required.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1727.

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    Date of creation: Oct 1985
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    Publication status: published as Inman, Robert P. "Appraising the Funding Status of Teacher Pensions: An Econometric Approach, National Tax Journal, Vol. 39, No. 1, pp. 21-34, March 1986.
    Handle: RePEc:nbr:nberwo:1727

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    1. Michael J. Boskin & John B. Shoven, 1987. "Concepts and Measures of Earnings Replacement During Retirement," NBER Working Papers 1360, National Bureau of Economic Research, Inc.
    2. Herman B. Leonard, 1984. "The Federal Civil Service Retirement System: An Analysis of its Financial Condition and Current Reform Proposals," NBER Working Papers 1258, National Bureau of Economic Research, Inc.
    3. Ehrenberg, Ronald G, 1980. "Correlates of Underfunding of Public Sector Retirement Systems," Economic Inquiry, Western Economic Association International, vol. 18(3), pages 493-500, July.
    4. Samuelson, Paul A, 1975. "Optimum Social Security in a Life-Cycle Growth Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(3), pages 539-44, October.
    5. Robert C. Merton, 1981. "On the Role of Social Security as a Means for Efficient Risk-Bearing in an Economy Where Human Capital Is Not Tradeable," NBER Working Papers 0743, National Bureau of Economic Research, Inc.
    6. Bulow, Jeremy I, 1982. "What Are Corporate Pension Liabilities?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 97(3), pages 435-52, August.
    7. Smith, Robert Stewart, 1981. "Compensating Differentials for Pensions and Underfunding in the Public Sector," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 463-68, August.
    8. Dennis Epple & Katherine Schipper, 1981. "Municipal pension funding: A theory and some evidence," Public Choice, Springer, vol. 37(1), pages 141-178, January.
    9. Feldstein, Martin S, 1976. "Perceived Wealth in Bonds and Social Security: A Comment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 84(2), pages 331-36, April.
    10. Arnott, Richard J. & Gersovitz, Mark, 1980. "Corporate financial structure and the funding of private pension plans," Journal of Public Economics, Elsevier, vol. 13(2), pages 231-247, April.
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    Cited by:
    1. Olivia S. Mitchell & Robert S. Smith, 1991. "Pension Funding in the Public Sector," NBER Working Papers 3898, National Bureau of Economic Research, Inc.

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