Resolution to Endorse the Recommendations of the 2014 Blue Ribbon Panel on Public Pension Plan Funding

Summary

This resolution urges states to declare their support of the recommendations found in 2014 Blue Ribbon Panel on Public Pension Plan Funding Report based upon the four basic funding principles of Adequacy, Intergenerational Equity, Cost Stability and Predictability.

Resolution to Endorse the Recommendations of the 2014 Blue Ribbon Panel on Public Pension Plan Funding

Resolution to Endorse the Recommendations of the  2014 Blue Ribbon Panel on Public Pension Plan Funding

WHEREAS, many states and local government entities are facing significant defined benefit (DB) pension unfunded liabilities. The cumulative deficits computed in today’s dollars are estimated to be between $1T to $3T with some estimates exceeding this range depending upon the precise actuarial methodology and assumptions utilized.

WHEREAS, such deficits are unsustainable and have led to repeated fiscal concerns expressed by actuaries, accountants and other financial professionals. These pension liabilities, together with other fiscal imbalances, have resulted in successive credit rating downgrades of state and local debt.

WHEREAS, many DB plans are projected to become insolvent unless significant and comprehensive reforms are enacted to make these plans sustainable.

WHEREAS, plan design changes affecting both current and future members represent an essential component of the necessary comprehensive pension reforms.

WHEREAS, to achieve long-term DB plans sustainability will require accompanying reforms consisting of adopting and consistently adhering to proper funding policies.

WHEREAS, to date the predominate focus of most pension reform efforts has emphasized plan design changes while frequently neglecting or deferring the necessary and appropriate reforms to existing funding policies.

WHEREAS, chronic underfunding and the absence of sound funding policies will lead to more plan insolvencies even if plan design changes are successfully implemented.

WHEREAS, there is a paucity of efforts addressing proper pension funding practices. What is needed is a template to develop proper funding reforms.

WHEREAS, a basic funding tenet is that, in the aggregate, pension benefits should be funded over the same period that benefits are being earned.

WHEREAS, in the spirit of federalism, every state should determine a precise funding policy {and adhere to it} based upon sound financial funding principles.

NOW, THEREFORE BE IT RESOLVED in support of achieving the necessary comprehensive and sustainable pension reforms, such long-overdue funding reforms must be adopted and consistently followed. To facilitate the development of this important goal, {insert state} supports the recommendations found in 2014 Blue Ribbon Panel on Public Pension Plan Funding Report based upon the four basic funding principles of Adequacy, Intergenerational Equity, Cost Stability and Predictability. As such, {insert state} endorses this report as a starting point for the development of a precise set of funding assumptions and funding methods appropriate to the respective public entity.

Establishing and consistently adhering to a DB funding policy consistent with these principles has secondary benefit as being generally consistent with many of the tenets formulated by the Government Accounting Standards Board (GASB) and certain credit rating agencies.

BE IT FURTHER RESOLVED that achieving this basic level and standard of pension funding should be achieved without the use of new debt.

Approved by the ALEC Board of Directors January 9, 2015.

Re-approved by the ALEC Board of Directors September 18, 2018.