The Marin Post

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Recession Rocks State and Local Pensions, ‘Funding Gap’ Possible

This is an excellent analysis of the impact of the recession, caused by Covid-19, on public pension funds. We are already seeing local government agencies and school districts trying to find ways to shore up the gap. We will undoubtedly see several new tax measures on the upcoming November ballot.

CLICK HERE to read the article

The article notes,

"The economic shutdown caused by the coronavirus will result in a steep drop in tax revenue for state and local governments, forcing them to make difficult decisions about how to fund the state pension systems their employees rely on for their retirement.

"Pensions are largely funded from three sources: investment returns, employer mandated contributions on behalf of the workers, and employees who give a portion of their salaries. While funds have pared some losses on the investment front thanks to a bounce-back in the stock market, the ongoing recession will create problems for participating employers and the workers themselves.

"The problem is so serious that states may suspend their contributions, “which would create a funding gap for state pension plans,” said Richard Johnson, a senior fellow and director of Program on Retirement Policy with the Urban Institute.

"Should deficits continue, it would pressure public employers, such as state and local governments, as well as school districts, into more drastic measures for filling the gap in the future.

"That could mean decreased funding for other priorities as they divert more of their incomes to pension plans as liabilities increase relative to assets. It could also portend future cuts in benefits to retirees or increases in contribution requirements for employers and workers."

As highlighted in Bob Bunnell's Marin Voice, many of these government agencies and districts were struggling to fund pensions well before the pandemic precipitated a recession.

If this doesn't lead to some serious pension reform efforts, I am beginning to believe that nothing ever will.