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Public Pension Plans: Myths and Realities for State Budgets

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  • Giertz, J. Fred
  • Papke, Leslie E.

Abstract

We explore the interaction of state pension systems with state finances. We find that changes in pension assets are an important source of funding for state governments, but that states face incentive problems that impede funding efforts with the result that many plans are underfunded. We analyze the substantive differences between defined benefit and defined contribution plans for public employees and state governments. Regression analysis using a panel of 85 state public pension plans indicates some evidence of actuarial assumption manipulation to reduce funding pressure. Plan demographics and state tax revenues are significant influences on funding ratios, while plan features are not.

Suggested Citation

  • Giertz, J. Fred & Papke, Leslie E., 2007. "Public Pension Plans: Myths and Realities for State Budgets," National Tax Journal, National Tax Association;National Tax Journal, vol. 60(2), pages 305-323, June.
  • Handle: RePEc:ntj:journl:v:60:y:2007:i:2:p:305-23
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    Citations

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    Cited by:

    1. Robert L. Clark & Lee A. Craig & John Sabelhaus, 2011. "State and Local Retirement Plans in the United States," Books, Edward Elgar Publishing, number 13685.
    2. Robert Novy-Marx & Joshua D. Rauh, 2008. "The Intergenerational Transfer of Public Pension Promises," NBER Working Papers 14343, National Bureau of Economic Research, Inc.
    3. repec:eee:hapoch:v1_865 is not listed on IDEAS
    4. repec:bla:pbudge:v:37:y:2017:i:1:p:68-87 is not listed on IDEAS
    5. Mohan, Nancy & Zhang, Ting, 2014. "An analysis of risk-taking behavior for public defined benefit pension plans," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 403-419.
    6. Splinter, David, 2017. "State pension contributions and fiscal stress," Journal of Pension Economics and Finance, Cambridge University Press, vol. 16(01), pages 65-80, January.
    7. repec:bla:pbudge:v:37:y:2017:i:4:p:92-110 is not listed on IDEAS
    8. Richard F. Dye, 2008. "The dynamic between municipal revenue sources and the state-local relationship in New England," New England Public Policy Center Working Paper 08-1, Federal Reserve Bank of Boston.
    9. Don H. Chamberlain & L. Murphy Smith & Randall B. Bunker, 2016. "An examination of US state pensions by total state expenditures, state budget deficit and red v. blue state," International Journal of Economics and Accounting, Inderscience Enterprises Ltd, vol. 7(1), pages 27-44.
    10. Sutirtha Bagchi, 2013. "The Effects of Political Competition on the Funding and Generosity of Public-Sector Pension Plans," 2013 Papers pba941, Job Market Papers.

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