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Public Pension Fund Update March 22, 2010

Posted by federalist in Pensions.
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Andrew Biggs has an excellent assessment of state pension funds. The sad news for taxpayers:

My research indicates that overall underfunding tops $3 trillion.

Vested pension benefits are constitutionally guaranteed in eight states and protected by law in two dozen more. And in most every state politics makes accrued benefits impossible to cut.

He also notes that the responsible way to fund defined-benefit pensions is one in which taxpayers are not on the hook for the rosy assumptions politicians make about future market returns. Especially since markets provide assets (e.g., treasury bonds) that can be purchased to fully cover pension liabilities with zero risk.

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