Pension Sustainability

The Brookings Institution - a Washington, DC thinktank - has long published a journal, Brookings Papers on Economic Activity. Papers for the journal are first presented in the conference by the authors with discussants. The eventual result is later published. One panel today (via Zoom) dealt with the sustainability of public pensions. The authors of the paper for that panel simulated various scenarios of a sample of public pension plans including UCRP.* (Plans included are listed on Table 2 of the paper.) The authors - among other things - consider whether the plans run out of assets in their trust funds and when. UCRP essentially doesn't run out of assets in any foreseeable scenario. Under some scenarios, the UCRP trust fund runs out in 50+ years. This result is in contrast with CalSTRS, another California plan in the sample, which has more problems.

Basically, the critiques of the paper provided by the discussants was that risk and volatility were not adequately reflected in the paper.

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*Jamie Lenney, Bank of England; Byron Lutz, Federal Reserve Board of Governors; Finn Schüle, Brown University; and Louise Sheiner, Brookings Institution, "The Sustainability of State and Local Government Pensions: A Public Finance Approach," https://www.brookings.edu/wp-content/uploads/2021/03/BPEASP21_Lenney-et-al_conf-draft_updated_3.24.21.pdf. A summary is at https://www.brookings.edu/bpea-articles/the-sustainability-of-state-and-local-government-pensions-a-public-finance-approach/. The discussants were Deborah Lucas, Massachusetts Institute of Technology; and Josh Rauh, Stanford Graduate School of Business.