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Are State Public Pensions Sustainable? Why the Federal Government Should Worry About State Pension Liabilities

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  • Rauh, Joshua D.

Abstract

This paper analyzes the flow of state pension benefit payments relative to asset levels and contributions. Assuming future state contributions fund the full present value of new benefits, many state systems will run out of money in 10–20 years if some attempt is not made to improve the funding of liabilities that have already been accrued. The expected shortfalls raise the possibility that the federal government will be faced with a decision as to whether to bail out states driven to insolvency by their pension programs.

Suggested Citation

  • Rauh, Joshua D., 2010. "Are State Public Pensions Sustainable? Why the Federal Government Should Worry About State Pension Liabilities," National Tax Journal, National Tax Association;National Tax Journal, vol. 63(3), pages 585-601, September.
    • Handle: RePEc:ntj:journl:v:63:y:2010:i:3:p:585-601
    DOI: 10.17310/ntj.2010.3.08
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    References listed on IDEAS

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    1. Ponds, Eduard H. M. & Riel, Bart Van, 2009. "Sharing risk: the Netherlands' new approach to pensions," Journal of Pension Economics and Finance, Cambridge University Press, vol. 8(1), pages 91-105, January.
    2. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-926, Sept./Oct.
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    Cited by:

    1. Eric M. Leeper, 2010. "Monetary science, fiscal alchemy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 361-434.
    2. 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.
    3. 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.
    4. Clemens, Jeffrey & Cutler, David M., 2014. "Who pays for public employee health costs?," Journal of Health Economics, Elsevier, vol. 38(C), pages 65-76.
    5. Saeid Mahdavi & Joakim Westerlund, 2017. "Are state–local government expenditures converging? New evidence based on sequential unit root tests," Empirical Economics, Springer, vol. 53(2), pages 373-403, September.

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