Skip to main content
MENU
Subscribe
  • Login
  • My Account
  • Logout
  • Register For Free
  • Subscribe
  • Topics
    • Alternatives
    • Artificial Intelligence
    • CIOs
    • Consultants
    • Defined Contribution
    • ESG
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Partner Content
    • Private Credit
    • Pension Funds
    • Private Equity
    • Real Estate
    • Regulation
    • Special Reports
    • Washington
    • White Papers
  • International
    • U.K.
    • Canada
    • Europe
    • Asia
    • Australia - New Zealand
    • Middle East
    • Latin America
    • Africa
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Influential Women in Institutional Investing 2024
    • Eddy Awards
  • Resource Guides
    • Active Thematic Global Equities
    • Retirement Income
    • Fixed Income
    • Pension Risk Transfer
    • Pooled Employer Plans (PEPs)
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • ESG Rated ETFs
    • Divestment Database
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • DC Plan Design: Improving Participant Outcomes
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
  • Print
Breadcrumb
  1. Home
  2. ASSET OWNERS
March 24, 2015 01:00 AM

S&P: Public pension funds dictating state budgets, policy and credit ratings

Meaghan Offerman
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Illinois Capitol

    Public pension funds will continue to shape public policy, budgets and potentially credit quality for states, said a report from Standard & Poor's.

    New pension accounting standards and actuarial assumptions; weak funding ratios; slowing reform efforts and legal challenges; and a renewed interest in pension obligation bonds are driving policy and budget debates and could impact credit quality this year and beyond, the report said.

    While their impact on credit ratings is expected to be minimal, new Governmental Accounting Standards Board requirements add a “spotlight” to pension liabilities and could increase funding pressures, said Robin Prunty, managing director in the U.S. public finance department at S&P and co-author of the report.

    GASB 67 requires that pension funds report a depletion date or when projected benefit payments exceed their projected assets. Benefits payable after the depletion date must be discounted to a present value using a much lower rate, which could raise liabilities for some pension funds.

    Changes in actuarial assumptions such as new mortality tables or lower assumed rates of return are also driving liability changes and accelerating funding pressures. The assumed rate of return for the majority of state pension funds ranges from 7.5% to 8%. However, there has been “a general movement to lower return assumptions,” which has “generally increased liabilities, lowered funded ratios and resulted in increased pension contributions,” the report said.

    The report further noted that while many states have enacted some amount of pension reform, those efforts come with “implementation risk,” which “translates to budget risk if savings are included before legal challenges are resolved.”

    Ms. Prunty said pension reform efforts appear to be in a bit of a “holding pattern” as some states wait on the outcome of legal challenges. Some states might also be slow to take up additional reforms if previous efforts did not appear to “move the needle significantly.”

    However, the impact of new GASB standards on unfunded liabilities could give some pension reform efforts “a second wind,” S&P predicted in the report.

    Finally, a growing interest in pension obligation bonds could put pressure on states' budget requirements. While bond proposals are still pending in Pennsylvania, Kentucky and Kansas, pension bond issuances have historically “carried risks and opportunities from a credit perspective,” depending on the overall financing plan and timing of the bond issuance, the report said.

    Related Articles
    Impact of GASB's new pension rules on government bond ratings
    Good returns ease public fund fears as GASB reporting changes take hold
    State pension funds' combined underfunding rises to $4.7 trillion — report
    NIRS: Shifting to DC did not save money for states
    Pennsylvania Senate passes pension reform bill
    Survey: Fewer changes to public plan retirement benefits in 2014
    Moody's: Pension liabilities increasing for majority of largest local governmen…
    Moody's: Older IRS mortality tables could save sponsors $18 billion next year
    Recommended for You
    A globe on a desk next to a laptop.
    Institutions eke out positive returns during volatile Q1 — Wilshire TUCS
    Northern_Trust_Universe_1550_i.jpg
    Northern Trust universe posts 0.7% median return for Q1
    Anca Drexler
    Building Ontario Fund chooses CIO from OMERS
    Sponsored
    White Papers
    The State of Lifetime Income Report
    The Next Wave of LDI Evolution
    Retirement security to future income wins, TIAA brings you the latest financial…
    U.S. Public Funds Top Performers: Q2 2024
    Generative AI Investing: Opportunities at a Key Tech Inflection Point
    Research for Institutional Money Management: Advancing Physical Risk Modelling,…
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    October 23, 2023 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Custom Content
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2025. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Artificial Intelligence
      • CIOs
      • Consultants
      • Defined Contribution
      • ESG
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Partner Content
      • Private Credit
      • Pension Funds
      • Private Equity
      • Real Estate
      • Regulation
      • Special Reports
      • Washington
      • White Papers
    • International
      • U.K.
      • Canada
      • Europe
      • Asia
      • Australia - New Zealand
      • Middle East
      • Latin America
      • Africa
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Influential Women in Institutional Investing 2024
      • Eddy Awards
    • Resource Guides
      • Active Thematic Global Equities
      • Retirement Income
      • Fixed Income
      • Pension Risk Transfer
      • Pooled Employer Plans (PEPs)
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • ESG Rated ETFs
      • Divestment Database
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • DC Plan Design: Improving Participant Outcomes
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
    • Print