@techreport{NBERw14343, title = "The Intergenerational Transfer of Public Pension Promises", author = "Robert Novy-Marx and Joshua D. Rauh", institution = "National Bureau of Economic Research", type = "Working Paper", series = "Working Paper Series", number = "14343", year = "2008", month = "September", doi = {10.3386/w14343}, URL = "http://www.nber.org/papers/w14343", abstract = {The value of pension promises already made by US state governments will grow to approximately $7.9 trillion in 15 years. We study investment strategies of state pension plans and estimate the distribution of future funding outcomes. We conservatively predict a 50% chance of aggregate underfunding greater than $750 billion and a 25% chance of at least $1.75 trillion (in 2005 dollars). Adjusting for risk, the true intergenerational transfer is substantially larger. Insuring both taxpayers against funding deficits and plan participants against benefit reductions would cost almost $2 trillion today, even though governments portray state pensions as almost fully funded.}, }