Central Policies for Local Debt: the Case of Teacher Pensions

52 Pages Posted: 28 Dec 2006 Last revised: 4 Jun 2021

See all articles by Robert P. Inman

Robert P. Inman

University of Pennsylvania - Finance Department; National Bureau of Economic Research (NBER)

David J. Albright

affiliation not provided to SSRN

Date Written: February 1987

Abstract

The recent debt crises in New York City and Cleveland, the deterioration of public infra-structures in certain of our states and larger cities, and the occasional bankruptcy of smaller pension plans suggest that not all of local finance stands on a sound fiscal base. This paper examines the trends in funding for one form of state and local government debt--teacher pensions underfundings -- and asks what a central government might do to check any unwanted growth in these liabilities. The analysis concludes (i) that this form of state-local debt is sizeable and growing, (ii) that state and local governments have an implicit pay-as-you-go bias in pension financing which encourages the growth of debt, but (iii) central government benefit and funding regulations or debt relief policies can slow, or even reverse, that growth.

Suggested Citation

Inman, Robert P. and Albright, David J., Central Policies for Local Debt: the Case of Teacher Pensions (February 1987). NBER Working Paper No. w2166, Available at SSRN: https://ssrn.com/abstract=346973

Robert P. Inman (Contact Author)

University of Pennsylvania - Finance Department ( email )

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David J. Albright

affiliation not provided to SSRN

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