Q & A
Why Pew Works with States on Pension Reforms
A conversation about Pew's pension work with Project Director Greg Mennis
This Q&A was updated on Feb. 9, 2016 to better reflect the needs of states when seeking policy solutions.
Why is The Pew Charitable Trusts focusing on public pension reform?
Public pension reform is arguably one of the most significant fiscal challenges facing states and municipalities today. In fact, our research shows that as of 2010, state governments had pension debts totaling $757 billion. Although some plans are well-funded, in other places, if changes are not made, retirees, workers, and taxpayers will be left with rising costs and unpaid promises for years to come.
So what's the solution?
There is no one-size-fits-all solution. Every state and municipality has a unique set of policy preferences and budgetary challenges.
Real change requires good information, thoughtful debate, and difficult choices.
The most important task facing states and cities is to pay down their existing pension debt in order to keep the promises already made to retirees and workers. This will require years of fiscal discipline and may involve raising revenue, cutting spending, or asking employees to contribute more. Some stakeholders will want to solve the pension shortfall only with tax increases. Others will want to solve it only with spending cuts. Each state and city will address the issue differently and we know there is no one-size-fits-all solution.
Policymakers also need to ensure that they have a sustainable retirement system for the future. This can involve keeping the existing retirement plan but doing a better job at funding it; it can also involve looking at questions of plan design. States and cities will need to find their own solutions that will help protect against future funding crises.
Why are you partnering with the Laura and John Arnold Foundation?
We share the goal to help states design and adopt retirement systems that are fair, affordable and fiscally sustainable—while at the same time preserving governments' ability to recruit and retain a talented public-sector workforce. We realize there is no one-size-fits all solution so through our public sector retirement systems project we offer policymakers information that can help them offer retirement security to public workers, protect taxpayers and maintain the state's ability to deliver important public services.
(The Arnold Foundation does not provide any financial support to The Pew Research Center, a subsidiary of The Pew Charitable Trusts.)
How does the partnership's technical assistance work?
Specifically, the partnership can provide a national perspective by sharing our knowledge of public sector retirement systems, reform options, and plan design from across the 50 states. We can conduct a full and accurate financial and actuarial analysis of pension plans—working with both the state or city pension plan's actuary as well as outside actuarial partners to ensure that policymakers have the data they need to make decisions. And finally, we can help city or state policymakers to develop and analyze reform options enabling them to make an informed choice as to what set of policies would be right for them.
Some say that your project is undermining retirement security, is that true?
No. All public employees – past, present, and future – deserve a secure retirement system. This begins with keeping pension promises that have already been made. And going forward, states need a fair set of solutions that will put public workers on a path to retirement security while protecting taxpayers and maintaining the ability to fund and deliver important public services.
Our project seeks to provide good information to help interested states and cities adopt retirement systems that meet these goals.
Some critics say Pew focuses on unfunded pension liabilities but does not address other state fiscal issues, such as budget shortfalls elsewhere and the use of tax expenditures, especially for corporations.
It is not surprising that some stakeholders will want to solve the pension shortfall only with tax increases. Others will want to solve it only with spending cuts. Each state and city will address the issue differently and we know there is no one-size-fits-all solution.