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Key findings:
- Many experts favor full prefunding of state and local pensions to maintain fiscal sustainability, which means big contribution hikes.
- This analysis explores an alternative: stabilizing pension debt as a share of GDP.
- Under current contribution rates, baseline projections show no sign of a major crisis in the next two decades even if asset returns are low.
- Yet, many plans will be at risk over the long term of exhausting their assets, so action will be needed.
- Plans can reach a sustainable footing by stabilizing their debt-to-GDP ratio, with much smaller contribution hikes than under full funding.
Author(s): Louise Sheiner
Publication Date: 11 April 2023
Publication Site: Center for Retirement Research at Boston College