March 9, 2011

The Truth Behind State Pensions

Veronique de Rugy

George Gibbs Chair in Political Economy

Veronique de Rugy explains that some people claim state pensions are not in crisis because of differing accounting standards.

“The states are using government accounting standards, which assumes 8 percent returns, which is really high,” said de Rugy. “With that standard, the state of New Jersey reports that its pension systems are underfunded by $44.7 billion. When you apply a standard used by private companies, methods that economists almost universally agree are more appropriate, New Jersey’s unfunded benefit obligation rises to $173.9 billion.”