How Public Pension Boards Are Making a Crisis Worse

For the last decade, analysts have been arguing over whom to blame for America's state and local pension crisis. Politicians? Public employee unions? Financial markets? Amid the din, the detrimental role of public pension boards has been overlooked.

There is a mounting body of evidence that pension boards, which oversee the funds created by employer and employee contributions, are partly to blame for the underfunding problem. Pension board members' incentives lead them away from a focus on the plans' long-term fiscal health. In a new report, I document those incentives and their consequences and recommend ways to mitigate -- and even eliminate -- the governance issues.