The determinants of public pension liabilities
Lim, Jae Young
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The recent recession pummeled state and local governments across the United States. The fiscal stress caused by the recession also awakened the public to the increasing public pension debt. Despite snowballing pension debt, few studies have comprehensively explored what causes public pension debt. The dissertation starts with the introduction. In the second chapter entitled Emergence of State and Local Pension Problems in the Late 2000s, I offer a brief summary of public pension history, including the impacts of the recent recession on state and local governments. Indeed, I provide examples of the states and cities hit hard by public pension problems. In the third chapter entitled Literature Review of State and Local Pension, I provide a review of the state of public pension studies. In the fourth chapter entitled The Determinants of Public Pension Liabilities, I offer two empirical models that explore the impacts of state politics, public unions, fiscal constraints, and fiscal stress on state unfunded pension liabilities and unfunded ratios. This dissertation employs the new data on pension debts for state defined benefit plans from the Pew Charitable Trusts from 2003 to 2012. Using a General Estimating Equation model, the results found that five factors influence unfunded pension liabilities while seven factors are associated with unfunded pension ratios. The study offers implications of the findings, noting that there is not an easy fix for current state pension deficits. The final chapter concludes limitations of the study and ideas for future research.