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Do public pension obligations affect state funding costs?

Author

Listed:
  • Burson, Jean

    () (Federal Reserve Bank of Cleveland)

  • Carlson, John

    (Federal Reserve Bank of Cleveland)

  • Ergungor, O. Emre

    (Federal Reserve Bank of Cleveland)

  • Waiwood, Patricia

    ()

Abstract

States’ unfunded pension obligations to their current and retired employees have exploded in recent years to levels that are estimated to be between $750 billion and $4.4 trillion. In theory, this massive debt should have implications for states’ ability to meet their financial obligations and a measurable impact on funding costs. Yet, we find no evidence that municipal bond markets are pricing the risks to states’ fiscal health arising from these large obligations.

Suggested Citation

  • Burson, Jean & Carlson, John & Ergungor, O. Emre & Waiwood, Patricia, 2013. "Do public pension obligations affect state funding costs?," Working Paper 1301, Federal Reserve Bank of Cleveland, revised 01 Jul 2014.
    • Handle: RePEc:fip:fedcwp:1301
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    File URL: https://www.clevelandfed.org/newsroom-and-events/publications/working-papers/2013-working-papers/wp-1301-do-public-pension-obligations-affect-state-funding-costs.aspx
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    References listed on IDEAS

    as
    1. Diebold, Francis X. & Li, Canlin, 2006. "Forecasting the term structure of government bond yields," Journal of Econometrics, Elsevier, vol. 130(2), pages 337-364, February.
    2. Robert Novy-Marx & Joshua D. Rauh, 2012. "Fiscal Imbalances and Borrowing Costs: Evidence from State Investment Losses," American Economic Journal: Economic Policy, American Economic Association, vol. 4(2), pages 182-213, May.
    3. Amy B. Monahan, 2010. "Public Pension Plan Reform: The Legal Framework," Education Finance and Policy, MIT Press, vol. 5(4), pages 617-646, October.
    4. Nelson, Charles R & Siegel, Andrew F, 1987. "Parsimonious Modeling of Yield Curves," The Journal of Business, University of Chicago Press, vol. 60(4), pages 473-489, October.
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    Cited by:

    1. Byron Lutz & Louise Sheiner, 2014. "The Fiscal Stress Arising from State and Local Retiree Health Obligations," NBER Working Papers 19779, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Pensions; Local finance;

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