Summary: Congress has long been concerned about the condition of State and local government pension plans. Almost all public pension plans have unfunded accrued liabilities and will continue to have such liabilities for many years. To investigate the potential financial impact of pension funding reform, the funding of 72 pension plans administered by 8 States and 26 local governments within those States were examined. For most plans, recent actuarial studies indicated that plans were generally prepared in accordance with recognized actuarial procedures. These procedures did not necessarily comply with those required of private plans under the Employee Retirement Income Security Act of 1974. A number of States and local governments have begun to tackle the problem of pension funding. Pension reform activities range from attempting to identify the problem, to adopting and implementing measures to solve it. A major obstacle to pension reform is the immediate cost impact. Because of voter opposition to tax increases, State and local governments are using or considering approaches to finance pension reforms which include extending expiring taxes, substituting user charges for taxes, and using Federal revenue sharing funds. Pension reform at the State and local levels is moving slowly. Although sponsoring governments are responsible for sound funding of State and local government plans, the Federal Government has a substantial interest in these pension plans. Many jursidictions have relied more and more on Federal grant funds and revenue sharing to help pension plan costs. These plans directly effect the continued well-being and security of millions of State and local government employees and their dependents. Therefore, Congress should assure through legislation the long-term financial stability of these pension plans through sound funding standards.
