Summary: Congress has long been concerned about the condition of State and local pension plans. State and local government pension plan funding presents a difficult issue. It has been estimated that the unfunded accrued liabilities of all State and local government pension plans were as much as $175 billion in 1975 and have grown since then. A number of State and local governments have begun to tackle the problem of pension funding. Pension reform actions taken thus far 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 other approaches to finance pension reforms. There is some question as to the extent of the Federal Government's authority to regulate State and local government pension plans. The Federal Government does have a direct interest in State and local government pension plans through its grant programs. Pension reform at the State and local levels is moving slowly. It is clear that to protect the pensions benefits earned by public employees and to avert fiscal disaster, State and local governments should fund the normal or current cost of their pension plan on an annual basis and amortize the plans' unfunded liabilities. Congress should assure through legislation the long-term financial stability of these pension plans through sound funding standards.
