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Congressional Research Service

No Pension Crisis, but an Investment Issue

I have been perplexed by the apparent inability of communities in America to make infrastructure investments. Many of those made more than 100 years ago are breaking down, as in the PG&E gas lines and electrical transmission lines, but also bridges, freeways, etc.

Recently I came across a most interesting study by Jeffrey M. Stupak, Economic Impact of infrastructure investment, published by the Congressional Research Service 2018.

The chart below tells a part of the story.


We have substantially dropped infrastructure investments and this is seen in factors like pension fund investments that used to be local: that is, funds invested retirement contributions in local development, often via bank deposits or local bonds.

This changed dramatically in the 70's and 80's, where funds shifted investments into hedge funds and a variety of financial instruments managed outside of local areas. In other words, we have lost control of our retirement funds and the actuarial models have changed ideas of how much money pension funds need to cover future liabilities.

This has created more supposed "underfunded" pension schemes, as has been claimed in the recent report on San Rafael. In direct contradiction to these models, more pension funds have gone bankrupt and been taken over by the the Pension Benefit Guaranty Corporation (PBGC), a federal agency, than in the 40 years before 1980.

Financial investments and faulty actuarial models are largely to blame as well as private companies looting their pension funds for self-dealing purposes. Instead of a pension crisis, we have a pension strategy problem that is linked to Wall Street's constant need for fees.

We need local control of our pension funds.

For more on actuarial models and funding goals see: Sgouros, Tom, 2017 “Funding Public Pension: Is Full Pension Funding a Misguided Goal?” Haas Institute:

and also:

Ring, Edward, (2013) “A method to estimate the pension contribution and pension liability of your city or county,” July 24, California Policy Center,



Pensions, Fees, Investment, Actuarial models, infrastructure