Editor’s note: This piece appears in the Summer 2019 Issue of National Affairs
At the turn of the millennium, public pensions seemed to be riding high. By their own accounting, most such funds were more than fully funded, and public workers' retirement benefits were more generous than ever after a round of enhancements in the 1990s. But the two decades that followed have decimated the finances of many public-pension funds, resulting in steeply rising taxpayer costs and serious negative effects on public workers' salaries, jobs, and benefits.
The great irony is that the retirement systems that were meant to protect public workers, shielding them from the vagaries of the market, have often accentuated the effects of market swings, increasing the threats to public workers' financial well-being. Today's strong economy means policymakers are not under maximal pressure: They can see the problem, but they do not yet truly feel it. That time will come, however, and if public pensions are going to survive over the long term, funding and investment practices must improve, and benefits need to be modernized to flexibly meet the needs of today's public workforce.
There won't be a better time to avert the next pension crisis. And there are a few key steps that every jurisdiction should be taking.
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