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Central Policies for Local Debt: The Case of Teacher Pensions

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  • Robert P. Inman
  • David J. Albright

Abstract

The recent debt crises in New York City and Cleveland, the deterioration of public infra-structures in certain of our states and larger cities, and the occasional bankruptcy of smaller pension plans suggest that not all of local finance stands on a sound fiscal base. This paper examines the trends in funding for one form of state and local government debt--teacher pensions underfundings -- and asks what a central government might do to check any unwanted growth in these liabilities. The analysis concludes (i) that this form of state-local debt is sizeable and growing, (ii) that state and local governments have an implicit pay-as-you-go bias in pension financing which encourages the growth of debt, but (iii) central government benefit and funding regulations or debt relief policies can slow, or even reverse, that growth.

Suggested Citation

  • Robert P. Inman & David J. Albright, 1987. "Central Policies for Local Debt: The Case of Teacher Pensions," NBER Working Papers 2166, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2166
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    References listed on IDEAS

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    1. Inman, Robert P., 1982. "Public employee pensions and the local labor budget," Journal of Public Economics, Elsevier, vol. 19(1), pages 49-71, October.
    2. Zvi Bodie & Alan J. Marcus & Robert C. Merton, 1988. "Defined Benefit versus Defined Contribution Pension Plans: What are the Real Trade-offs?," NBER Chapters, in: Pensions in the U.S. Economy, pages 139-162, National Bureau of Economic Research, Inc.
    3. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-926, Sept./Oct.
    4. Dennis Epple & Katherine Schipper, 1981. "Municipal pension funding: A theory and some evidence," Public Choice, Springer, vol. 37(1), pages 141-178, January.
    5. Laurence J. Kotlikoff & Daniel E. Smith, 1983. "Pensions in the American Economy," NBER Books, National Bureau of Economic Research, Inc, number kotl83-1, July.
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    Cited by:

    1. Robert P. Inman, 1987. "Federal Assistance and Local Services in the United States: The Evolution of a New Federalist Fiscal Order," NBER Working Papers 2283, National Bureau of Economic Research, Inc.
    2. Mitchell, Olivia S & Smith, Robert S, 1994. "Pension Funding in the Public Sector," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 278-290, May.

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