Alternative investments: is it a solution to the funding shortage of US public pension plans?

2019 ◽  
Vol 19 (4) ◽  
pp. 491-510 ◽  
Author(s):  
Jun Peng ◽  
Qiushi Wang
Keyword(s):  
Local Governments ◽  
Private Equity ◽  
Pension Plans ◽  
Public Pension ◽  
Investment Performance ◽  
Alternative Investments ◽  
Investment Return ◽  
State And Local ◽  
Public Pension Plans ◽  
The Impact

AbstractSince 2001, public-pension plans have increasingly relied upon alternative investments (AIs). We examine the impact of this trend on investment performance and the factors that led to the reliance on AI. Using data from 92 largest plans 2001–2014, we found AI, especially private equity, generally had a positive effect on investment performance, but the effect was small and unsustainable. We also found that plans with a lower funded ratio and higher investment return expectation were more likely to allocate more assets to AIs. These findings suggest that the prospect of relying on AIs to meet investment return expectations remains a long-term challenge for state and local governments.

scholarly journals State and Local Government Pension Funding on the Eve of the COVID-19 Recession

2020 ◽  
Vol 53 (1) ◽  
pp. 16-23
Author(s):  
John G. Kilgour
Keyword(s):  
Accounting Standards ◽  
Pension Plans ◽  
Public Pension ◽  
Asset Valuation ◽  
Governmental Accounting ◽  
The Public ◽  
State And Local Government ◽  
State And Local ◽  
Public Pension Plans ◽  
The Impact

This article examines the funding of public pension plans through 2019. Particular attention is paid to the impact of the Governmental Accounting Standards Board’s Standard No. 68. It addressed (1) discount rates, (2) amortization periods, (3) asset valuation and smoothing, and (4) the actuarial cost method used. The combined effect of these measures has been to increase the amount of public pension underfunding significantly. The actuarial funded ratio of the 126 plans in the Public Plans Database went from 101.9 in 2001 to 71.9 in 2019, on the eve of the COVID-19 recession. It will no doubt continue to worsen in the years ahead. The extent of that likely worsening is also explored.

Unfunded Public Pension Liabilities and Local Citizen Oversight

2014 ◽  
Vol 29 (1) ◽  
pp. 23-39 ◽  
Author(s):  
Kevin T. Rich ◽  
Jean X. Zhang
Keyword(s):  
Citizen Participation ◽  
Local Governments ◽  
Pension Plans ◽  
Public Pension ◽  
Legislative Process ◽  
Defined Benefit ◽  
Municipal Governments ◽  
State And Local ◽  
Pension Liabilities ◽  
Jel Classifications

SYNOPSIS We examine whether unfunded public pension liabilities are associated with citizen oversight through legislative and electoral means in local governments. Our focus on municipal pension plans is timely and relevant, given the prevalence of underfunded pension plans and the GASB's recently issued statements on state and local pension reporting. Using a sample of 84 locally administered municipal defined benefit pension plans in 2009, we find evidence that the level of unfunded pension obligations is negatively associated with both provisions allowing direct citizen participation in the legislative process and electoral voter activism in the form of recent recall attempts. Overall, our empirical evidence is consistent with citizen oversight mechanisms playing an important role in the pension funding decisions of municipal governments. JEL Classifications: G34; H55; H72.

SEC announces first investment adviser ‘pay-to-play’ enforcement action

2014 ◽  
Vol 15 (3) ◽  
pp. 35-37
Author(s):  
M. Norman Goldberger ◽  
John C. Grugan ◽  
Christine O’Neil ◽  
Tesia N. Stanley
Keyword(s):  
Local Governments ◽  
Private Equity ◽  
Historical Context ◽  
Pension Plans ◽  
Securities And Exchange Commission ◽  
Content Type ◽  
Enforcement Action ◽  
Political Contribution ◽  
State And Local ◽  
Investment Advisers

Purpose – To explain the first enforcement action the USA Securities and Exchange Commission (SEC) has brought under “pay to play” rules for investment advisers since those rules were adopted nearly four years ago. Design/methodology/approach – First, the article provides a summary of the SEC enforcement action against TL Ventures Inc., a Philadelphia-area private equity firm. Next, the article provides a historical context and some key provisions of the rules. Finally, the article provides political contribution policy and procedure recommendations. Findings – Political corruption in the municipal market has been a focus of the SEC for several years and is likely to continue to be a top priority. Investment advisers should ensure they have sufficient policies and procedures in place to avoid a two-year ban on business with a state or local government as the result of a political contribution. Originality/value – The article provides the facts underlying the SEC’s enforcement action, the historical context of municipal market pay-to-play rules, a summary of the pay-to-play prohibitions, and recommendations for avoiding rule violations. The article would be of interest to investment advisers, public pension plans, municipal securities underwriters, brokers, and dealers as well as state and local governments.

scholarly journals Annuity Pricing in Public Pension Plans: Importance of Interest Rates

2018 ◽  
Author(s):  
Nino Abashidze ◽  
Robert Clark ◽  
Beth Ritter ◽  
David Vanderweide
Keyword(s):  
Interest Rates ◽  
Pension Plans ◽  
Public Pension ◽  
Public Pension Plans

scholarly journals Worker Choices About Payouts in Public Pensions

2017 ◽  
Author(s):  
Robert L. Clark ◽  
Janet Raye Cowell
Keyword(s):  
Local Governments ◽  
Pension Plans ◽  
Policy Implications ◽  
Empirical Literature ◽  
Defined Benefit ◽  
Retirement Plans ◽  
The Public ◽  
State And Local ◽  
State Employees ◽  
State Pension

This chapter reviews available data on the annuity choices offered to retirees who participate in defined benefit (DB) plans. DB plans are most commonly offered by state and local governments to their employees, and information on annuity options is readily available. The authors examine all state pension plans that cover general state employees and teachers, and develop a table showing the similarities and differences across these approximately eighty separate state retirement plans. The authors determine the proportion of retirees selecting each of the annuity options. Where possible, annuity options in the public sector are compared to those offered by private sector employers. The chapter also reviews the empirical literature on who chooses the various annuity options offered in DB plans. Finally, the authors consider the policy implications of plan design and how this affects the types of annuities offered to retirees.

How Does a Reduction in Mandated Medicaid Spending Affect Local Fiscal Behaviors? Evidence from New York State

2021 ◽  
Vol 49 (4) ◽  
pp. 495-547
Author(s):  
Yusun Kim
Keyword(s):  
New York ◽  
Local Governments ◽  
Social Insurance ◽  
New York State ◽  
Property Tax ◽  
Effective Property ◽  
Medicaid Spending ◽  
State And Local ◽  
Sudden Decrease ◽  
The Impact

In 2005, New York (NY) state capped the growth of county-level Medicaid spending, which abruptly decreased counties’ Medicaid outlay in both relative and absolute terms. This study exploits this discontinuity in county Medicaid outlay to estimate the impact of the relief mandate policy on county budgets and property tax levies. It bridges a gap in the public finance literature by addressing local government responses to a sudden decrease in the outlay of a large mandatory spending category. We find a compositional change but no income effect on non-Medicaid spending. However, the policy reduced the effective property tax rate significantly by 6.6 to 8.1 percent on average among affected NY counties after the enactment of the policy relative to control counties. This study advances our understanding of local fiscal responses to an intergovernmental fiscal policy that changes how state and local governments share the costs of a large public social insurance program.

Risk Transfer in Public Pension Plans

2003 ◽  
pp. 102-115
Author(s):  
Olivia S. Mitchell ◽  
Kent Smetters
Keyword(s):  
Pension Plans ◽  
Public Pension ◽  
Risk Transfer ◽  
Public Pension Plans
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