Editorial Board
Public Pensions Should Be Safe, Not Levered Up
Borrowing money to boost returns is no way to ensure a comfortable retirement for the likes of firefighters, police and teachers.
Don’t pull that lever.
Photographer: Scott Eisen/BloombergAmerica’s public pension funds have gotten themselves into a bind. They’re responsible for paying trillions of dollars in future retirement benefits to teachers, firefighters, police, and other state and local employees, but their assets fall far short of what’s needed to fulfill those promises.
Increasingly, they’re turning to an age-old tactic to close the gap: using borrowed money, or leverage, to boost returns. It’s a troubling trend that regulators should watch carefully.