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Path Dependence in Pension Policy: The Case of Florida Local Governments
Author(s) -
Cong Yongqing,
Neshkova Milena I.,
Frank Howard A.
Publication year - 2017
Publication title -
public budgeting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.694
H-Index - 30
eISSN - 1540-5850
pISSN - 0275-1100
DOI - 10.1111/pbaf.12172
Subject(s) - solvency , pension , status quo , pension plan , recession , state (computer science) , business , government (linguistics) , local government , function (biology) , index (typography) , economics , independence (probability theory) , plan (archaeology) , finance , public economics , macroeconomics , political science , public administration , market economy , philosophy , algorithm , history , linguistics , archaeology , world wide web , computer science , biology , evolutionary biology , market liquidity , mathematics , statistics
Policymakers face significant liabilities with traditional defined benefit (DB) plans in the government. Unlike defined contribution (DC) plans, the fiscal risks under DB plans are borne by the plan sponsors, that is, state and local governments, and ultimately taxpayers. The Great Recession heightened pension solvency concerns in many jurisdictions, necessitating a reconsideration of their retirement systems. Drawing on Florida municipalities’ plans from 2006 to 2012, we develop an index of pension change and track its evolution. Findings reveal a preponderance of incremental change and suggest the lack of significant change may be a function of high financial costs and status quo bias.