Summary: Governments at all levels are increasingly looking to the nearly $4 trillion held as of 1992 by the nation's private and public pension plans to fund public needs through economically targeted investments (ETI). In fact, several state and local government employee pension plans have implemented ETI programs. Critics have raised concerns that plan participants may lose their retirement savings through economically dubious but politically expedient investments, requiring increased taxation and reductions in other needed spending to pay the costs. They cite widely publicized cases in Alaska, Connecticut, and Kansas, where public employee pension plans have lost millions of dollars through ETIs that went bad. This report answers the following three questions: What has been the extent of ETIs by nonfederal public employee pension plans, in terms of amounts invested and the types of investments? Did ETI programs aimed at business development realize competitive returns? What were the economic effects of business development ETI programs, such as jobs created?
