IDEAS home Printed from https://ideas.repec.org/a/sae/pubfin/v51y2023i3p368-431.html
   My bibliography  Save this article

Public Pension Reform and Credit Quality of State Governments

Author

Listed:
  • Trang Hoang

Abstract

The growth of unfunded pension liabilities has raised concern over states’ fiscal sustainability and threatens their ability to access the capital market. Over the past decade, many states have implemented different types of pension reforms to reduce pension costs, improve funding levels, and mitigate the risks of default on unfunded pension obligations. However, have these reforms enabled states to enhance their credit quality? This study uses state-level data from 2004 to 2018 to examine the relationship between state pension reforms and assigned credit ratings and outlooks. The findings show that the impact of pension reforms on a state's credit quality is tangible and differs by reform type and the government's financial capacity and debt level.

Suggested Citation

  • Trang Hoang, 2023. "Public Pension Reform and Credit Quality of State Governments," Public Finance Review, , vol. 51(3), pages 368-431, May.
    • Handle: RePEc:sae:pubfin:v:51:y:2023:i:3:p:368-431
    DOI: 10.1177/10911421221143569
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/10911421221143569
    Download Restriction: no
    File URL: https://libkey.io/10.1177/10911421221143569?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Jean-Pierre Aubry & Caroline V. Crawford & Alicia H. Munnell, 2017. "How Have Municipal Bond Markets Reacted to Pension Reform?," Issues in Brief ibslp57, Center for Retirement Research.
    2. Marks, Br & Raman, Kk, 1985. "The Importance Of Pension Data For Municipal And State Creditor Decisions - Replication And Extensions," Journal of Accounting Research, Wiley Blackwell, vol. 23(2), pages 878-886.
    3. Loviscek, Anthony L & Crowley, Frederick D, 1990. "What Is in a Municipal Bond Rating?," The Financial Review, Eastern Finance Association, vol. 25(1), pages 25-53, February.
    4. Tima T. Moldogaziev & Tatyana Guzman, 2015. "Economic Crises, Economic Structure, and State Credit Quality Through-the-Cycle," Public Budgeting & Finance, Wiley Blackwell, vol. 35(4), pages 42-67, December.
    5. Wagner, Gary A., 2004. "The Bond Market and Fiscal Institutions: Have Budget Stabilization Funds Reduced State Borrowing Costs?," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(4), pages 785-804, December.
    6. Cory Koedel & Michael Podgursky & Shishan Shi, 2013. "Teacher Pension Systems, the Composition of the Teaching Workforce, and Teacher Quality," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 32(3), pages 574-596, June.
    7. Amiel, Lindsay & Deller, Steven & Stallmann, Judith, 2009. "The Construction of a Tax and Expenditure Limitation Index for the US," Staff Paper Series 536, University of Wisconsin, Agricultural and Applied Economics.
    8. Jeffrey R. Brown, 2014. "Reforming Public Pensions Subject to Political and Legal Constraints: The Illinois Experience," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(4), pages 941-964, December.
    9. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, April.
    10. Barry R. Marks & K. K. Raman, 1988. "The effect of unfunded accumulated and projected pension obligations on governmental borrowing costs," Contemporary Accounting Research, John Wiley & Sons, vol. 4(2), pages 595-608, March.
    11. Robert K. Triest & Bo Zhao, 2013. "The role of economic, fiscal, and financial shocks in the evolution of public sector pension funding," Working Papers 13-26, Federal Reserve Bank of Boston.
    12. Copeland, Rm & Ingram, Rw, 1982. "The Association Between Municipal Accounting Information And Bond Rating Changes," Journal of Accounting Research, Wiley Blackwell, vol. 20(2), pages 275-289.
    13. Betsey Stevenson & Justin Wolfers, 2006. "Bargaining in the Shadow of the Law: Divorce Laws and Family Distress," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(1), pages 267-288.
    14. David H. Autor, 2003. "Outsourcing at Will: The Contribution of Unjust Dismissal Doctrine to the Growth of Employment Outsourcing," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 1-42, January.
    15. James M. Poterba & Jürgen von Hagen, 1999. "Fiscal Institutions and Fiscal Performance," NBER Books, National Bureau of Economic Research, Inc, number pote99-1.
    16. Chaney, Barbara A. & Copley, Paul A. & Stone, Mary S., 2002. "The effect of fiscal stress and balanced budget requirements on the funding and measurement of state pension obligations," Journal of Accounting and Public Policy, Elsevier, vol. 21(4-5), pages 287-313.
    17. Trang Hoang & Craig S. Maher, 2022. "Fiscal condition, institutional constraints, and public pension contribution: are pension contribution shortfalls fiscal illusion?," Public Budgeting & Finance, Wiley Blackwell, vol. 42(4), pages 93-124, December.
    18. Jean-Pierre Aubry & Caroline V. Crawford & Alicia H. Munnell, 2017. "How Have Municipal Bond Markets Reacted to Pension Reform?," State and Local Pension Plans Briefs ibslp57, Center for Retirement Research.
    19. Craig Depken & Courtney Lafountain, 2006. "Fiscal consequences of public corruption: Empirical evidence from state bond ratings," Public Choice, Springer, vol. 126(1), pages 75-85, January.
    20. Robert C. Lowry, 2001. "A Visible Hand? Bond Markets, Political Parties, Balanced Budget Laws, and State Government Debt," Economics and Politics, Wiley Blackwell, vol. 13(1), pages 49-72, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Heiko T. Burret & Lars P. Feld, 2014. "A Note on Budget Rules and Fiscal Federalism," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(01), pages 03-11, April.
    2. repec:ces:ifodic:v:12:y:2014:i:1:p:19108838 is not listed on IDEAS
    3. Trang Hoang & Craig S. Maher, 2022. "Fiscal condition, institutional constraints, and public pension contribution: are pension contribution shortfalls fiscal illusion?," Public Budgeting & Finance, Wiley Blackwell, vol. 42(4), pages 93-124, December.
    4. John A. Dove, 2017. "Judicial Independence and US State Bond Ratings: An Empirical Investigation," Public Budgeting & Finance, Wiley Blackwell, vol. 37(3), pages 24-46, September.
    5. Heiko T. Burret & Lars P. Feld, 2014. "A Note on Budget Rules and Fiscal Federalism," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(1), pages 03-11, 04.
    6. Skip Krueger & Robert W. Walker, 2008. "Divided Government, Political Turnover, and State Bond Ratings," Public Finance Review, , vol. 36(3), pages 259-286, May.
    7. Nikolov, Plamen & Adelman, Alan, 2019. "Do private household transfers to the elderly respond to public pension benefits? Evidence from rural China," The Journal of the Economics of Ageing, Elsevier, vol. 14(C).
    8. Lekniūtė, Zina & Beetsma, Roel & Ponds, Eduard, 2019. "U.S. municipal yields and unfunded state pension liabilities," Journal of Empirical Finance, Elsevier, vol. 53(C), pages 15-32.
    9. Federico Belotti & Joanna Kopinska & Alessandro Palma & Andrea Piano Mortari, 2022. "Health status and the Great Recession. Evidence from electronic health records," Health Economics, John Wiley & Sons, Ltd., vol. 31(8), pages 1770-1799, August.
    10. Dilla, Diana, 2017. "Staatsverschuldung und Verschuldungsmentalität [Public Debt and Debt Mentality]," MPRA Paper 79432, University Library of Munich, Germany.
    11. Asatryan, Zareh & Castellón, César & Stratmann, Thomas, 2018. "Balanced budget rules and fiscal outcomes: Evidence from historical constitutions," Journal of Public Economics, Elsevier, vol. 167(C), pages 105-119.
    12. Timothy Besley & Anne Case, 2003. "Political Institutions and Policy Choices: Evidence from the United States," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 7-73, March.
    13. Ana Tur-Prats, 2017. "Unemployment and intimate-partner violence: A gender-identity approach," Economics Working Papers 1564, Department of Economics and Business, Universitat Pompeu Fabra.
    14. Timothy C. Irwin, 2015. "Defining The Government'S Debt And Deficit," Journal of Economic Surveys, Wiley Blackwell, vol. 29(4), pages 711-732, September.
    15. Kurt Schmidheiny & Sebastian Siegloch, 2023. "On event studies and distributed‐lags in two‐way fixed effects models: Identification, equivalence, and generalization," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(5), pages 695-713, August.
    16. Kugler, Adriana & Pica, Giovanni, 2008. "Effects of employment protection on worker and job flows: Evidence from the 1990 Italian reform," Labour Economics, Elsevier, vol. 15(1), pages 78-95, February.
    17. Cicatiello, Lorenzo & De Simone, Elina & Ercolano, Salvatore & Gaeta, Giuseppe Lucio, 2021. "Assessing the impact of fiscal transparency on FDI inflows," Socio-Economic Planning Sciences, Elsevier, vol. 73(C).
    18. Dettmann, Eva & Giebler, Alexander & Weyh, Antje, 2019. "flexpaneldid: A Stata command for causal analysis with varying treatment time and duration," IWH Discussion Papers 5/2019, Halle Institute for Economic Research (IWH).
    19. Ho Lun Wong, 2021. "Effect of marriage registration on fertility and intrahousehold distribution in Thailand," Pacific Economic Review, Wiley Blackwell, vol. 26(3), pages 312-338, August.
    20. Juan Carlos Hatchondo & Leonardo Martinez & Francisco Roch, 2022. "Fiscal Rules and the Sovereign Default Premium," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(4), pages 244-273, October.
    21. Wildmer Daniel Gregori & Luigi Marattin, 2019. "Determinants of fiscal distress in Italian municipalities," Empirical Economics, Springer, vol. 56(4), pages 1269-1281, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:51:y:2023:i:3:p:368-431. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.