American Council for Capital Formation
Tim Doyle Vice President of Policy & General Counsel
U.S. public pension systems were born in New York City, starting with an 1857 plan to pay police officers injured on the job. Over the next few decades, New York City pension eligibility spread to include firefighters and teachers, and eventually evolved into the current practice of providing beneficiaries with lifetime payments following retirement.
Throughout the 20th century, most state and municipal governments established pension plans – following the lead of the federal government – that employed a mix of employee contributions, taxpayer money and investment appreciation to pay benefits to retired public servants. The same is true today. The problem today is that a combination of program mismanagement, unrealistic performance assumptions, and investment decisions tied more to political considerations than financial ones have caused public pension funds to become underfunded by more than $1 trillion, a liability ultimately borne by taxpayers.