Hostname: page-component-7c8c6479df-8mjnm Total loading time: 0 Render date: 2024-03-28T03:12:57.624Z Has data issue: false hasContentIssue false

Political economy of public sector retirement plans*

Published online by Cambridge University Press:  12 April 2011

SYLVESTER J. SCHIEBER
Affiliation:
(e-mail: Syl.Schieber@gmail.com)

Abstract

Virtually all state and local government employers in the United States offer workers some sort of retirement benefits today but there is significant variation in the characteristics of those plans. There is also a great deal of public angst about the level and timing of commitments made in these plans. The literature on retirement plans suggests that they are important elements of compensation that plan sponsors use in meeting their human resource goals. But public retirement plans are created and operated in a public policy environment and forces other than local labor market considerations may be brought to bear in the organization and operation of these plans. This paper explores some of the possible explanations for the variation in state retirement plans. Public disclosure data is used to develop a model that explains relative generosity of benefits based on the characteristics of participants and the marketplaces in which the plans are offered. The final section of the paper places the issues explored in a forward looking context. The public disclosure environment recently put in place for public retirement plans is likely to have a more profound effect on state pension operations than any other development in recent history.

Type
Articles
Copyright
Copyright © Cambridge University Press 2011

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Bender, Keith A. and Heywood, John S. (2010) Out of Balance: Comparing Public and Private Compensation over 20 Years. National Institute on Retirement Security and Center for State & Local Government Excellence, available at http://www.slge.org/vertical/Sites/%7BA260E1DF-5AEE-459D-84C4-876EFE1E4032%7D/uploads/%7B03E820E8-F0F9-472F-98E2-F0AE1166D116%7D.PDFGoogle Scholar
Biggs, Andrew G. (2010) Public pensions cook the books. Wall Street Journal (6 July 2010), 256, p. A13.Google Scholar
Bornstein, Howard, Markuze, Stan, Percy, Cameron, Wang, Lisha and Zander, Moritz (2010) Going For Broke: Reforming California's Public Employee Pension Systems. SIEPR Policy Brief. Stanford: Stanford Institute for Economic Policy Research.Google Scholar
Branan, Brad (2010) Blame for Pension Plan Debt May Go to Those Behind the Scenes. Fresno Bee (9 April 2010), available at http://www.sanluisobispo.com/2010/04/09/1097668/blame-for-pension-plan-debt-may.html (accessed 21 July 2010).Google Scholar
Brown, Jeffrey R. and Wilcox, David W. (2009) Discounting state and local pension liabilities. American Economic Review, 99(2): 538542.CrossRefGoogle Scholar
Bureau of Labor Statistics (2010) Employer Costs for Employee Compensation News Release, 9 June 2010, available at http://www.bls.gov/news.release/ecec.nr0.htm (20 July 2010).Google Scholar
California Senate (1999) ‘SB400 Senate Bill – Bill Analysis’, available at http://info.sen.ca.gov/pub/99-00/bill/sen/sb_0351-0400/sb_400_cfa_19990908_063640_asm_floor.htmlGoogle Scholar
Chicago Sun Times (2009) A Year after Retiring, Jones to Get 51% Boost’ (11 September 2009) available at http://www.suntimes.com/news/politics/1764559,CST-NWS-pensionjones11.article (accessed 17 July 2010).Google Scholar
Clark, Robert J., Craig, Lee and Sabelhaus, John (2011) Public Pension Plans in the Twentieth Century. Northhampton, MA: Edward Elgar Publishing, forthcoming.CrossRefGoogle Scholar
Clark, Robert J., Craig, Lee and Ahmed, Neveen (2009) The evolution of public sector plans in the United States. In Mitchell, Olivia S. and Anderson, Gary (eds), The Future of Public Employee Retirement Systems. Oxford: Oxford University Press, pp. 239270.CrossRefGoogle Scholar
Fehr, Stephen C. (2010) States Tackling Public Employee Retirement Benefits in 2010. Stateline.org (19 February 2010), available at http://www.stateline.org/live/details/story?contentId=461796Google Scholar
Fronstin, Paul (2005) Impact of the Erosion of Retiree Health Benefits on Workers and Retirees. EBRI Issue Brief (March 2005), No. 279, available at http://www.ebri.org/pdf/briefspdf/0305ib.pdfGoogle ScholarPubMed
General Accountability Office (2010) State and Local Governments’ Fiscal Outlook. Washington, DC: GAO. GAO-10-358, p. 11.Google Scholar
Governmental Accounting Standards Board (2010) Preliminary Views on Major Issues Related to Pension Accounting and Financial Reporting by Employers (GASB, 2010), available at http://www.gasb.org/cs/ContentServer?%20c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176156938122 (accessed 24 July 2010).Google Scholar
Laing, Jonathan R (2010) The $2 Trillion Hole. Barrons (15 March 2010).Google Scholar
Legislative Analyst's Office (2007) Public Employee Retirement Benefits Background and Policy Principles. Presented to: Public Employee Post-Employment Benefits Commission, 26 April 2007, available at www.lao.ca.gov/retireehealth/media/public_employee_benefits_042607.ppt (accessed 21 July 2010).Google Scholar
Los Angeles Times (2010) ‘Curing Pension Envy’ (25 July 2010), Home Edition, Opinion Section, available at http://articles.latimes.com/2010/jul/25/opinion/la-oe-paul-california-pensions-20100725Google Scholar
Mendel, , Ed (2009) Pension Spikes: Lavish Retirement Pay is Drawing Closer Scrutiny. Capitol Weekly (30 July 2009), available at http://www.capitolweekly.net/article.php?xid=y5qn8ger3ylp9c (accessed 17 July 2010).Google Scholar
Monahan, Amy B. (2010) ‘Public Pension Plan Reform: The Legal Framework’, (University of Minnesota Law School, 2010), Legal Studies Research Paper Series, Research Paper No. 10–13.Google Scholar
Moore, Cynthia (2000) Is Your Pension Protected? A Compilation of Constitutional Pension Protections for Public Educators. Washington, DC: American Association of Retired Persons.Google Scholar
Morrison, , Foerster, L. L. P., Greenebaum, Doll and McDonald, P. L. L. C. (2007) ‘Index by States’, available at http://finance.ky.gov.NR/rdonlyres/275A2978-5DDE-4138-A7F5-AF02D17D7F97/0/State-bystatememo10.pdfGoogle Scholar
Mysak, Joe (2010) Taxpayers Don't Need $2.9 Trillion Pension Overhaul. Bloomberg News (12 July 2010), available at: http://www.bloomberg.com/news/2010-07-13/taxpayers-don-t-need-2-9-trillion-pension-repair-commentary-by-joe-mysak.html (accessed 24 July 2010).Google Scholar
National Association of State Retirement Administrators (2005) Myths and Misperceptions of Defined Benefit and Defined Contribution Plans. (February 2005) NASRA White Paper, p. 3, available at http://www.nasra.org/resources/myths%20and%20misperceptions.pdfGoogle Scholar
New York Times (2010) ‘Top Recipients of Public Pensions in New York,’ (May 20, 2010) available at http://www.nytimes.com/interactive/2010/05/15/business/pension.html?scp=5&sq=public%20pensions&st=cse (17 July 2010).Google Scholar
Novy-Marx, Robert and Rauh, Joshua D. (Fall 2009) The liabilities and risks of state sponsored pension plans. Journal of Economic Perspectives, 23(4): 191210.CrossRefGoogle Scholar
Pew Center on States (2010) The Trillion Dollar Gap: Underfunded State Retirement Systems and the Roads to Reform. Philadelphia, PA: The Pew Center on States.Google Scholar
Poterba, James M. and Rueben, Kim S. (1994) The Distribution of Public Sector Wage Premia: New Evidence Using Quantile Regression Methods. Working Paper 4734. Cambridge, MA: National Bureau of Economic Research.CrossRefGoogle Scholar
Rainey, James (2010) On the Media: How the Press Missed the Pension Increase. Los Angeles Times (8 December 2010), available at http://www.latimes.com/entertainment/news/la-et-onthemedia-20101208,0,7321785.columnGoogle Scholar
Rauh, Joshua D (2010) ‘Are State Pensions Sustainable? Why the Federal Government Should Worry about State Pension Liabilities,’ paper presented at a conference, ‘Train Wreck: A Conference on Americas Looming Fiscal Crisis,’ sponsored by Urban-Brookings Tax Policy Center and the USC-Caltech Center for the Study of Law and Politics, 15 January 2010.CrossRefGoogle Scholar
Smith, Sharon P. (1976) Government wage differentials by sex. Journal of Human Resources, 11(2): 185199.CrossRefGoogle Scholar
Sass, Steven A. (1997) The Promise of Private Pensions. Cambridge: Harvard University Press.Google Scholar
U.S. Census Bureau (2008) Survey of State and Local Public Employee Retirement Systems, available at http://www.census.gov/govs/retire/Google Scholar
U.S. House of Representatives (1978) Committee on Education and Labor, Pension Task Force Report on Public Employee Retirement Systems (95th Congress, 2nd Session, 15 March 1978).Google Scholar
U.S. Senate, Special Committee on Aging (2010) Social Security Modernization: Options to Address Solvency and Benefit Adequacy. Washington, DC: U.S. Government Printing Office, available at http://aging.senate.gov/letters/ssreport2010.pdfGoogle Scholar
Von Drehle, David (2010) The other financial crisis. Time (28 June 2010), pp. 2229.Google Scholar
Walsh, Mary Williams (2010) Maine giving social security another look. The New York Times (21 July 2010), p. A1.Google Scholar
Walsh, Mary Williams and Schoenfeld, Amy (2010) Padded pensions add to New York fiscal woes. The New York Times (20 May 2010), p. A1.Google Scholar