Altogether, an estimated 75 percent of U.S. local government pensions are run through centrally administered plans, such as state “cost-sharing” systems, the ratings agency found in a sweeping survey of the public pension landscape that analyzed 8,000 local governments….“In half of the states, many local governments of all types are directly linked to the asset performance of one or two large pension plans,” Moody’s said. “Management of this market risk is beyond the control of most local governments in cost-sharing plans, where they typically have little if any influence over investment policy or decisions.”
Needless to say, this will make reform very tricky. Local governments can’t take action on their own initiative to deal with mounting pension costs, since they’re largely at the mercy of decisions made at more centralized levels. It’s easy to see how the combination of special interest cronyism, tortuous bureaucratic structures, and politically expedient but fanciful pension promises got us into this mess. But it’s increasingly difficult to see what will get us out.