Recent studies and data compilation by the U.S. Census Bureau, Government Accountability Office, Federal Reserve Bank of Cleveland and Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School detail the continued deterioration and ultimate long-term chance of failure of public pension systems within the overall local and state government fiscal crisis.  These represent the latest, best, most objective, clear and devastating reports on the perilous state pension situation.

Underfunded Public Pensions in the United States: The Size of the Problem, the Obstacles to Reform and the Path Forward

from the Mossavar-Rahmani Center for Business & Government
April 2012

This paper explains the complex nature of pensions as a form of deferred compensation, to describe the size of the problem faced by public pension plan sponsors, and - most important - to offer a series of potential policy changes that can address the problem of public pension underfunding.

The paper analyzes and explains a series of recent efforts to size the magnitude of the public pension crisis in the U.S., and further examine the myriad financial, accounting, legal and political causes of the current predicament. It also examines case studies of those states and local governments that have succeeded in the face of pension challenges and those that have not. It finds that "[o]nly through understanding the mix of dynamic issues that affect public pensions will we be able to generate practical solutions to this growing problem."

State and Local Governments' Fiscal Outlook

by the U.S. Government Accountability Office
April 2012

The state and local government sector continues to face near-term and long-term fiscal challenges that grow over time. The fiscal challenges confronting the state and local sector add to the nation's overall fiscal challenges. The fiscal situation of the state and local government sector has improved in the past year as the sector's tax receipts have slowly increased in conjunction with the economic recovery. Nonetheless, total tax receipts have only recently returned to the prerecession levels of 2007 and the sector still faces a gap between revenue and spending. The sector faces long-term fiscal challenges that grow over time. The fiscal position of the sector will steadily decline through 2060 absent any policy changes.

Public Finances: Shining Light on a Dark Corner

The Federal Reserve Bank of Cleveland
Spring 2012

The financial crisis has made it all too clear that regulators failed to see into the dark corners of the financial system. With that in mind, the Federal Reserve Banks of Cleveland and Atlanta have formed a Financial Monitoring Team to study pension funds and municipal finance with an eye toward implications for the wider economy and financial system. This article explain where risks could be building and how reforms might help forestall their impact on the broader economy and financial system.

Monitoring the Risks of State and Local Finance

The Federal Reserve Bank of Cleveland
Spring 2012

The finances of many state and local governments are in a somewhat precarious condition. First came the financial crisis and recession, which sapped tax revenue and stretched budgets. Then came the painfully slow recovery, which ramped up demand for social safety net services, especially unemployment benefits. Despite some modest improve­ments, the blows to state and local governments have been heavy. According to the Center on Budget and Policy Priorities, 29 states will be facing budget shortfalls for fiscal year 2013. On top of all this, governments are struggling to address chronic underfunding of their pension plans.

Navigating the Legal Landscape for Public Pension Reform: Travel at Your Own Risk

The Federal Reserve Bank of Cleveland
Spring 2012

Today, nearly all states protect public pensions to varying degrees, working in a complicated legal environment. As a result, reform-minded policymakers have to tread carefully, treating each state as a separate case. By no means is public pension reform out of the question, but legal precedent in a given state determines what reforms are realistic there. 

Quarterly Summary of the Finances of Selected State and Local Government Employee Retirement System 2011

United States Census Bureau

The U.S. Census released 2011 results for public pensions representing 89.4 percent of the national total. A quick look shows those funds fell another $1.4 trillion short of politicians' promises.