State Pension Plans for Public Employees: A Rough Road Ahead

Many public pension funds face serious funding shortfalls. In fact, more than half of the states currently have public pension funds with funded ratios that are less than 80 percent, a level many prefer. In this paper we examine factors important in explaining the funded ratios of state and local pension funds for public employees. We extend the study of Munnell et al. (2011) by (1) considering additional factors that may affect the funded ratio, (2) using panel data from 2001 to 2013, and (3) using different statistical methods. We demonstrate the importance of using the lagged funded ratio in our regressions to explain the current level of the funded ratio and its impact on the statistical significance of other coefficients.