Do Political Parties Matter for the Funding Status of State Pension Plans

Given the financial troubles facing state pension plans in recent years, we examine determinants of the ratio of assets to liabilities, or the so-called \"funded ratio,\"\u0027 based on data for 148 pension plans from 2001 to 2013. The focus in this study is on whether politics plays a role in the extent to which pension plans are fully or less than fully funded. In particular, we consider whether both the political party of the governor and the majority political party of the state legislature are determinants of the funded ratio. We control for other factors that are also likely to be related to the funded ratio. We employ empirical techniques that are best suited to address potential econometric problems in the empirical work. In general, our results indicate that politics does indeed play a significant role in explaining the funded ratios of state pension plans across the country.