‘Like telling a 30-year mortgage holder it’s all due at year-end’ — Pressure on public pensions may rely on flawed math

'Like telling a 30-year mortgage holder it's all due at year-end' --- Pressure on public pensions may rely on flawed math

Just how healthy are U.S. public pensions?

While news media coverage — and critics — of public pensions often draw attention to large unfunded liabilities, a new study from a public-pension trade group offers a fresh way of viewing those liabilities — one they say is more relevant to how the economy and markets SPX, +0.27% work.

The group, the National Conference on Public Employee Retirement Systems (NCPERS), argues for a new approach to considering liabilities in the context of economic growth, known as “sustainability valuation.”

Critics of public pensions “compare 30-year pension liabilities, that is, liabilities that are amortized over 30 years, with one-year state and local revenues. They then argue that public pensions are unsustainable,” writes the author of the NCPERS report, Michael Kahn.

“Comparing 30-year pension liabilities to one-year state and local revenues is like a bank telling the borrower his or…

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