The case against equity investment by U.S. corporate pension funds has been well
documented for a quarter century. The public sector has ignored or dismissed
that case because of differences between taxation and accounting between the
private and public sectors, the differing interests of shareholders and
taxpayers, and the presumption that public plans last forever. Despite these
differences, shifting public pension fund investments from equities to bonds
adds value for local taxpayers. It also minimizes the risks of intergenerational
taxpayer conflicts, undercharges to employees’ compensation packages for
the value of the pensions, employee claims on pension surplus, and higher
governmental borrowing costs.