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NCPERS Reports Public Pensions Have Staying Power Despite Short-Term Economic Setbacks

On June 2, 2020, the National Conference on Public Employee Retirement Systems (NCPERS) published its Research Series article, In Tranquility or Turmoil, Public Pensions Keep Calm and Carry On.  The purpose of the article is to examine whether public pension debt is sustainable despite the negative impact of the current coronavirus pandemic on financial markets.  According to NCPERS, “Public pensions have the economic capacity to keep paying benefits in difficult times notwithstanding short-term hitches caused by the COVID-19 health crisis.” 

Key findings include:

  • As a result of the COVID-19 pandemic, the loss in the value of state and local pension funds is estimated to be about $1.16 trillion.
  • On a conservative basis, it would cost a maximum of $3.86 billion per year to rebound over the next 30 years to maintain a stable ratio of pension debt to gross domestic product (GDP), which amounts to 0.02% of annual GDP.
  • As measured by GDP, economic growth greatly exceeds the growth in pension liabilities when compared using a 30-year time period.

The report concludes, “public pension debt is sustainable in perpetuity if a stable ratio of debt to GDP is maintained.  This can be achieved by monitoring this ratio on a regular basis and making minor adjustments along the way.  In the meantime, policy makers must continue to follow good pension funding policies and discipline and align their revenue systems with their economies to best exploit the economic capacity of their states.”

The report is available here.