[Congressional Record Volume 168, Number 124 (Tuesday, July 26, 2022)]
[House]
[Page H7077]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




         UNDERFUNDING STATE AND LOCAL PUBLIC EMPLOYEE PENSIONS

  The SPEAKER pro tempore. The Chair recognizes the gentlewoman from 
North Carolina (Ms. Foxx) for 5 minutes.
  Ms. FOXX. Madam Speaker, at the State and local levels, public 
employees are often promised defined benefit pension plans that are 
subsidized through the tax code and exempt from ERISA's funding, 
notice, and disclosure requirements.
  Too often, State and local governments have not kept their end of the 
bargain and are failing to fund employee pensions adequately. The 
numbers suggest public employee pensions are dangerously underfunded. 
Economists estimate that State pension plans are collectively 
underfunded by as much as $5.8 trillion.
  According to the Center for Retirement Research at Boston College, 
public pension funds have on hand an average of just 75 cents for every 
dollar expected to go to retirees in future benefits.
  Simply put, there is not enough money set aside to meet retirement 
obligations. This raises serious questions about the promises that 
public employers make and the practices they use to address 
underfunding.
  I am especially concerned with recent news reports that some States 
and localities, rather than making responsible decisions to manage 
their plans, are adopting a risky practice: betting on the stock market 
with borrowed money.
  According to The Wall Street Journal, in 2021, more than 100 State, 
city, and county governments borrowed money for their pension funds and 
invested in stocks and other investments.
  Nearly $13 billion in pension obligation bonds were sold last year, 
which is more than in the prior 5 years combined. Here is the problem 
with issuing pension obligation bonds: They can backfire.
  Investing with borrowed money can increase returns when markets are 
rising, but it makes losses more severe in down markets. This is 
especially concerning given the recent struggles in the stock and bond 
markets. According to recent reports, public pension funds have lost 
10.4 percent, on average, in 2022.
  When investments using borrowed money don't perform as hoped and 
returns fall below the bond interest rate, the city, State, or county 
winds up paying even more than if it hadn't borrowed in the first 
place.
  In light of recent multibillion-dollar taxpayer bailouts of private-
sector pension plans, there is no question about where State and local 
governments will turn when investments fall short and trillions in 
pension plans come due.

  Madam Speaker, I urge public employers to make decisions to fund 
their pension plans responsibly. Plans should not be gambling with the 
retirement savings of the hardworking men and women who depend on these 
pensions.

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