Many analyst and lawmakers have been sounding the alarm regarding pensions. They claim that the pensions are crippling state budgets and are too expensive for tax payers. A new report from the National Conference on Public Employee Retirement Systems ( NCPERS ) presented findings that state and local pension’s plans are in fact sustainable. The report goes on to claim that state and local pensions have consistently met obligations for the past 25 years.
Acting as a “striking counterpoint” to initiatives that seek to rid state and local municipalities of public pensions, NCPERS claims that underfunded pensions are not a problem. In a tone reminiscent to the early days of the mortgage crisis, Michael Kahn, NCPERS’ director of research exclaimed that public pensions are still capable of meeting their obligations despite being underfunded.
According to NCPERS, contributions and investment earnings by 6,000 public pension plans exceeded benefit obligations between the years of 1993 and 2016- only four years excepted. During those four years – 2002, 2008, 2009, and 2012- public pension plans were able to meet their obligations by drawing from reserves stored during normal times.
Mr. Kahn also explained to reporters that arguments against public pensions were based on predictions about the future. “No one can reliably and accurately see into the future, but we can certainly look at the part and measure what actually happened. And what happened is that the pensions consistently met their obligations regardless of their long-term funding levels.”
A startling claim given that municipalities across the country are struggling to maintain operations, citing pension cost as the number one cost driver. It appears that the NCPERS are detailing a fiscal plan that includes staring at a rear view mirror for future guidance. A policy that is not only fraught with danger, but may very well prove to be reckless.
All charts in this article are from the NCPERS report