Alabama's Public Pensions: Building a Stable Financial Foundation for the Years Ahead

54 Pages Posted: 12 Jun 2015

See all articles by James R. Barth

James R. Barth

Auburn University; Milken Institute

John S. Jahera

Auburn University - Harbert College of Business

Date Written: June 10, 2015

Abstract

Over the past 10 years, Alabama's public retirement system has seen its liabilities overtake its assets by more than $15 billion. This means the system has only 66 cents for every dollar owed to current and future retirees. Worse still, the shortfall has been growing by $4 million each day that our elected officials fail to tackle the problem. As we document, the state should implement a "cash balance" pension plan structure for all new employees. Also, the judicial retirement plan should be amended to bring benefits more in balance with the pensions of other state employees to reduce the significant disparity that exists. Lastly, the Alabama Education Association staff, which includes a group of lobbyists, should no longer be able to participate in the public pension system and should instead select a private retirement plan of its own.

Keywords: pensions, retirement systems, cash balance, unfunded pensions

JEL Classification: G18, H72, H75

Suggested Citation

Barth, James R. and Jahera, John S., Alabama's Public Pensions: Building a Stable Financial Foundation for the Years Ahead (June 10, 2015). Available at SSRN: https://ssrn.com/abstract=2616849 or http://dx.doi.org/10.2139/ssrn.2616849

James R. Barth (Contact Author)

Auburn University ( email )

415 West Magnolia Avenue
Auburn, AL 36849
United States
334-844-2469 (Phone)
334-844-4960 (Fax)

Milken Institute ( email )

1250 Fourth Street
Santa Monica, CA 90401
United States

John S. Jahera

Auburn University - Harbert College of Business ( email )

415 Magnolia Ave.
Auburn, AL 36849
United States
334-844-5344 (Phone)

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