There have been some progressive developments and some setbacks at the state level in terms of investing public pension fund assets.
As sophisticated as pension fund officials have become at the public fund level, some states continue to restrict the investment of retirement assets.
There's no reason to have such legal restraints on public fund investing. Rather than securing the assets as planned, the restrictions have caused "opportunity losses" which may have weakened the plans. The prohibitions are in part why state public funds in Indiana and West Virginia - which have banned equities - were underfunded.
On the good news front, last month the Indiana Public Employees' Retirement Fund makes its historic first allocation to equities, following an amendment last November to the state's constitution to eliminate the ban on equities. Congratulations.
The move leaves West Virginia the lone holdout against equities, although the state's pension fund officials continue to battle to lift the restriction.
On another front, the state Legislature adopted a rule allowing the Wyoming Retirement System to follow prudent person guidelines. The old rule, although it did permit investing in equities, restricted investment in such a way that it effectively banned even conservative stock index funds.
In other types of public funds, the Alaska Permanent Fund failed to win approval from the Legislature to raise its equity allocation limit to 60% from 50%. But the New Mexico Permanent Fund won approval to liberalize its investments and hire its first external managers.
These latter cases show there are still too many restrictions on investing, beyond Indiana and West Virginia. Legislatures need to update and liberalize investing. Those that don't face a real year 2000 problem, a drag on returns.
How would Social Security compare under the current system vs. privatization?
The Cato Institute, Washington, has unveiled an innovative interactive Web site allowing anyone to find out.
The site - www.socialsecurity.org - despite the name, is operated by Cato, not the Social Security Administration.
It calculates your would-be benefits under privatization, letting you pick various asset allocations to stocks and bonds using different economic and inflation scenarios.
Then it compares it with your supposed Social Security benefits. All you need to do is to plug in your age and income and pick your scenarios.
The site, by the way, is secure, because the calculations stay in your computer and aren't transmitted over the Internet.
The Cato Project on Social Security Privatization, of which the Web site is only a slender piece, produces a wealth of valuable papers and other information on reforming the system.
The site is a valuable contribution in persuading the public to support privatization.
As Michael Tanner, director of the project, noted, the calculator brings the public policy debate to a personal level, allowing individuals to see how a change in Social Security will affect his or her own retirement benefits.