Hostname: page-component-586b7cd67f-t7fkt Total loading time: 0 Render date: 2024-11-22T14:18:54.076Z Has data issue: false hasContentIssue false
  • English
  • Français

Board on the job: public-pension governance in the United States (US) states

Published online by Cambridge University Press:  28 November 2017

John Brooks
John Brooks*
Affiliation:
Department of Political Science and Public Administration, Auburn University at Montgomery, USA E-mail: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Although elected officials have the final say over pensions, boards of trustees also influence plan governance. Not a great deal is known about boards or how they shape policies. Boards are composed of politically and nonpolitically appointed members, as well as active and retired employees. Plan active-employee size turns out to be the best predictor of membership, suggesting that employee voice expands as plans cover more workers. Using both fixed effects and instrumental variables approaches, I show how boards shape plans’ policies and funded levels. Active and retired members shape discount rates, whereas active membership is positively associated with funded ratios. Interestingly, gridlock is also associated with higher discount rates. However, I find that plans’ actual investment returns are poor predictors of expected returns, irrespective of board composition. Although boards offer a venue through which states can manage funds, they are not suited to solving pensions’ governance challenges alone.

Keywords

bureaucracyfederalismpensionpublic financestate government
Type
Research Article
Information
Journal of Public Policy , Volume 39 , Issue 1 , March 2019 , pp. 1 - 34
Copyright
© Cambridge University Press, 2017 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Anzia, S. F. and Moe, T. M. (2017) Polarization and Policy: The Politics of Public-Sector Pensions. Legislative Studies Quarterly 42(1): 33–62.Google Scholar
Arnold, R. D. (1992) The Logic of Congressional Action. New Haven, CT: Yale University Press.Google Scholar
Balz, D. (2013) Red, Blue States Move in Opposite Directions in a New Era of Single-Party Control. Washington Post, Washington, DC, December 28, 2013.Google Scholar
Ban, C. and Ingraham, P. W. (1990) Short-Timers: Political Appointee Mobility and its Impact on Political-Career Relations in the Reagan Administration. Administration & Society 22(1): 106–124.Google Scholar
Barber, B. M. (2009) Pension Fund Activism: The Double-Edged Sword. In Mitchell O. S. and Anderson G. (eds), The Future of Public Employee Retirement Systems. New York, NY: Oxford University Press, 271–293.Google Scholar
Bartel, A. and Lewin, D. (1981) Wages and Unionism in the Public Sector: The Case of Police. The Review of Economics and Statistics 63(1): 53–59.Google Scholar
Binder, S. A. (2003) Stalemate: Causes and Consequences of Legislative Gridlock. Washington, DC: Brookings Institution Press.Google Scholar
Butt, A. (2012) Causes of Defined Benefit Pension Scheme Funding Ratio Volatility and Average Contribution Rates. Annals of Actuarial Science 6(1): 76–102.Google Scholar
CalPERS (2015) CalPERS Board Members, https://www.calpers.ca.gov/page/about/board/board-members (accessed 18 November 2015).Google Scholar
Cameron, A. C. and Miller, D. L. (2015) A Practitioner’s Guide to Cluster-Robust Inference. Journal of Human Resources 50(2): 317–372.Google Scholar
Carey, J. M., Niemi, R. G. and Powell, L. W. (2000) Incumbency and the Probability of Reelection in State Legislative Elections. Journal of Politics 62(3): 671–700.Google Scholar
Carpenter, D. P. (2001) The Forging of Bureaucratic Autonomy: Reputations, Networks, and Policy Innovation in Executive Agencies, 1862--1928. Princeton, NJ: Princeton University Press.Google Scholar
Cayer, J. N. (1998) Employee Benefits: From Health Care to Pensions. In Condrey S. E. (ed.), Handbook of Human Resource Management in Government. San Francisco, CA: Josey-Bass Inc. Publishers, 658–675.Google Scholar
Clark, R. L., Craig, L. A. and Ahmed, N. (2009) The Evolution of Public Sector Pension Plans in the United States. In Mitchell O. S. and Anderson G. (eds.), The Future of Public Employee Retirement Systems. New York, NY: Oxford University Press, 239–270.Google Scholar
Clark, R. L., Craig, L. A. and Wilson, J. W. (2003) A History of Public Sector Pensions in the United States. Philadelphia, PA: University of Pennsylvania Press.Google Scholar
Converse, P. E. (1964) The Nature of Belief Systems in Mass Publics. Critical Review 18(1–3): 1–74.Google Scholar
Cooper, M. and Walsh, M. W. (2011) Public Pensions, Once Of Limits, Face Budget Cuts. New York Times, New York, NY, August, http://www.nytimes.com/2011/04/26/us/26pensions.html?r=0 (accessed 14 January 2013).Google Scholar
Devins, N. and Lewis, D. E. (2008) Not-So Independent Agencies: Party Polarization and the Limits of Institutional Design. Boston University Law Review 88(2): 459–498.Google Scholar
Eaton, T. V. and Nofsinger, J. R. (2004) The Effect of Financial Constraints and Political Pressure on the Management of Public Pension Plans. Journal of Accounting and Public Policy 23(3): 161–189.Google Scholar
Epstein, D. and O’Halloran, S. (1999) Asymmetric Information, Delegation, and the Structure of Policy-Making. Journal of Theoretical Politics 11(1): 37–56.Google Scholar
Fiorina, M. P. (1992) An Era of Divided Government. Political Science Quarterly 107(3): 387–410.Google Scholar
Gilmour, J. B. and Lewis, D. E. (2006) Does Performance Budgeting Work? An Examination of the Office of Management and Budget’s PART Scores. Public Administration Review 66(5): 742–752.Google Scholar
Gold, J. and Latter, G. (2009) The Case for Marking Public Plan Liabilities to Market. In Mitchell O. S. and Anderson G. (eds.), The Future of Public Employee Retirement Systems. New York, NY: Oxford University Press, 29–57.Google Scholar
Government Accounting Standards Board (2006) Why Government Accounting and Financial Reporting Is-And Should be-Dierent. White Paper, http://www.gasb.org/cs/ContentServer?c=DocumentC&pagename=GASB/%2FDocumentC/%2FGASBDocumentPage&cid=1176162354189 (accessed 15 February 2013).Google Scholar
Hall, P. A. and Soskice, D. W. (2001) An Introduction to Varieties of Capitalism. In Hall P.A. and Soskice D. W. (eds.), Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. New York, NY: Oxford University Press, 1–68.Google Scholar
Heclo, H. (1975) OMB and the Presidency – The Problem of Neutral Competence. Public Interest 38: 80–98.Google Scholar
Heclo, H. (1977) A Government of Strangers: Executive Politics in Washington. Washington, DC: Brookings Institution Press.Google Scholar
Hess, D. (2005) Protecting and Politicizing Public Pension Fund Assets: Empirical Evidence on the Effects of Governance Structures and Practices. UC Davis Law Review 39: 187–227.Google Scholar
Hess, F. M. and Squire, J. P. (2010) “But the Pension Fund Was Just SITTING There…?: The Politics of Teacher Retirement Plans. Education 5(4): 587–616.Google Scholar
Hirsch, B. T. and Macpherson, D. A. (2003) Union Membership and Coverage Database from the Current Population Survey: Note. Industrial and Labor Relations Review 56(2): 349–354.Google Scholar
Hsin, P. L. and Mitchell, O. S. (1997) Managing Public-Sector Pensions. Public Policy Toward Pensions 36(8): 247.Google Scholar
Hunter, W. J. and Rankin, C. H. (1988) The Composition of Public Sector Compensation: The Effects of Unionization and Bureaucratic Size. Journal of Labor Research 9(1): 29–42.Google Scholar
Immergut, E. M. and Abou-Chadi, T. (2014) How Electoral Vulnerability Affects Pension Politics: Introducing a Concept, Measure and Empirical Application. European Journal of Political Research 53(2): 269–287.Google Scholar
Inman, R. P. (1981) “Municipal Pension Funding: A Theory and Some Evidence” by Dennis Epple and Katherine Schipper. Public Choice 37(1): 179–187.Google Scholar
Ippolito, R. A. (1987) Why Federal Workers Don’t Quit. The Journal of Human Resources 22(2): 281–299.Google Scholar
Ippolito, R. A. (1997) Pension Plans and Employee Performance. Chicago, IL: University of Chicago Press.Google Scholar
Johnson, R. W. (1997) Pension Underfunding and Liberal Retirement Benefits Among State and Local Government Workers. National Tax Journal 50(1): 113–142.Google Scholar
Jones, D. R. (2001) Party Polarization and Legislative Gridlock. Political Research Quarterly 54(1): 125–141.Google Scholar
Keele, L. and Kelly, N. J. (2005) Dynamic Models for Dynamic Theories: The Ins and Outs of Lagged Dependent Variables. Political Analysis 14(2): 186–205.Google Scholar
Lazear, E. P. (1979) Why is There Mandatory Retirement? Journal of Political Economy 87(6): 1261–1284.Google Scholar
Lee, S.-Y. and Whitford, A. B. (2008) Exit, Voice, Loyalty, and Pay: Evidence from the Public Workforce. Journal of Public Administration Research and Theory 18(4): 647–671.Google Scholar
Lewis, D. E. (2007) Testing Pendleton’s Premise: Do Political Appointees Make Worse Bureaucrats? Journal of Politics 69(4): 1073–1088.Google Scholar
Mactas, M. V. (1992) Is Your State Underfunding Your Pension Plan?. In Brzezinski M. J. (ed.), Public Employee Benefit Plans. Brookfield, WI: International Federation of Employee Benefit Plans.Google Scholar
Matkin, D. S. T., Chen, G. and Khalid, H. (2016) The Governance of Public Pensions. Administration & Society 1–29.Google Scholar
Mayhew, D. R. (1991) Divided We Govern. New Haven, CT: Yale University Press.Google Scholar
McCubbins, M. D. and Schwartz, T. (1984) Congressional Oversight Overlooked: Police Patrols Versus Fire Alarms. American Journal of Political Science 28(1): 165–179.Google Scholar
Moe, T. M. (1982) Regulatory Performance and Presidential Administration. American Journal of Political Science 26(2): 197–224.Google Scholar
Moe, T. M. (1985) Control and Feedback in Economic Regulation: The Case of the NLRB. American Political Science Review 79(4): 1094–1116.Google Scholar
Moe, T. M. (1989) The Politics of Bureaucratic Structure. In Chubb J. E. and Peterson P. E. (eds.), Can the Government Govern?. Washington, DC: The Brookings Institution, 267–329.Google Scholar
Moe, T. M. (1990) Political Institutions: The Neglected Side of the Story. Journal of Law, Economics & Organization 6: 215–253.Google Scholar
Munnell, A. H., Aubry, J.-P. and Quinby, L. (2011) Public Pension Funding in Practice. Journal of Pension Economics and Finance 10(2): 247–268.Google Scholar
Munnell, A. H., Haverstick, K. and Aubry, J.-P. (2008) Why Does Funding Status Vary Among State and Local Plans?. Center for Retirement Research at Boston College, http://crr.bc.edu/wp-content/uploads/2008/05/slp 6-508.pdf (accessed 3 April 2011).Google Scholar
Munnell, A. H. and Sunden, A. E. (2001) Investment Practices of State and Local Pension Funds: Implications for Social Security Reform. In Mitchell O. S. and Hustead E. C. (eds.), Pensions in the Public Sector. Philadelphia, PA: Pension Research Council & University of Pennsylvania Press, 153–194.Google Scholar
Nickell, S. (1981) Biases in Dynamic Models With Fixed Effects. Econometrica 49(6): 1417–1426.Google Scholar
Novy-Marx, R. and Ruah, J. D. (2009) The Liabilities and Risks of State-Sponsored Pension Plans. The Journal of Economic Perspectives 23(4): 191–210.Google Scholar
Novy-Marx, R. and Rauh, J. D. (2011) Public Pension Promises: How Big Are They and What Are They Worth? The Journal of Finance 66(4): 1211–1249.Google Scholar
Peng, J. (2004) Public Pension Funds and Operating Budgets: A Tale of Three States. Public Budgeting and Finance 24(2): 59–73.Google Scholar
Pierson, P. (1996) The New Politics of the Welfare State. World Politics 48(2): 143–179.Google Scholar
Romano, R. (1993) Public Pension Fund Activism in Corporate Governance Reconsidered. Columbia Law Review 93(4): 795–853.Google Scholar
Schneider, M. and Damanpour, F. (2002) Public Choice Economics and Public Pension Plan Funding: An Empirical Test. Administration & Society 34(1): 57–86.Google Scholar
Shor, B. and McCarty, N. (2011) The Ideological Mapping of American Legislatures. American Political Science Review 105(3): 530–551.Google Scholar
Snyder, S. K. and Weingast, B. R. (2000) The American System of Shared Powers: The President, Congress, and the NLRB. Journal of Law, Economics, and Organization 16(2): 269–305.Google Scholar
Stock, J. H. and Yogo, M. (2005) Testing for Weak Instruments in Linear IV Regression. In Stock J. H. and Andrews D. W. K. (eds.), Identification and Inference for Econometric Models. Cambridge, UK: Cambridge University Press, 80–108.Google Scholar
Sundquist, J. L. (1992) Constitutional Reform and Effective Government. Washington, DC: Brookings Institution Press.Google Scholar
US Government Accountability Office (2008) State and Local Government Retiree Benefits: Current Funded Status of Pension and Benefit Plans. Technical Report, Washington, DC, http://www.gao.gov/new.items/d08223.pdf (accessed 20 December 2010).Google Scholar
Wagner, G. A. (2001) Political Control and Public Sector Savings: Evidence from the States. Public Choice 109(1): 149–173.Google Scholar
Wahal, S. (1996) Pension Fund Activism and Firm Performance. Journal of Financial and Quantitative Analysis 31(1): 1–23.Google Scholar
Weaver, R. K. (1986) The Politics of Blame Avoidance. Journal of Public Policy 6(4): 371–398.Google Scholar
Wilson, J. Q. (1989) Bureaucracy: What Governments Do and Why They Do It. New York, NY: Basic Books.Google Scholar
Wooldridge, J. M. (2010) Econometric Analysis of Cross Section and Panel Data. Cambridge, MA: MIT Press.Google Scholar
Supplementary material: PDF

Brooks supplementary material

Online Appendix

Download Brooks supplementary material(PDF)
PDF 3.5 MB