State and Local Finance Office Director Kent
Hiteshew appointed the chief investment officer of Maryland's pension fund as a
policy adviser who will substantially strengthen the office's understanding of
the critical challenges facing a system upon which approximately 23 million
Americans depend ... for their retirement security.
State and local pensions now have enough money to cover only
72 percent of their costs, in comparison to nearly 100 percent in 2000. The
data from the U.S. Federal Reserve shows public pensions had $4.89 trillion in
assets in the first quarter of 2014, the highest on record. But they also had
the largest liabilities on record going back to 1945 - $5.03 trillion - and
their funding gap has widened since the 2007-2009 recession.
That recession devastated investment returns, the chief
revenue source for pensions, while simultaneously forcing states to cut
retirement contributions. While investments are gaining and many states have
increased contributions, public pensions face a bulge of retirees from the
"Baby Boom" generation. Hiteshew's office will study the state of
public pensions and help retirement systems evaluate their financial
conditions, and it will look into the growing costs of retiree healthcare.
Also on the office's agenda are President Barack
Obama's push for more infrastructure financing, including creating a
program akin to Build America Bonds, and continued monitoring of the
financial situation in Detroit and Puerto Rico.
Build America Bonds were created by the 2009
economic stimulus plan, and the program expired in 2011.The once popular bonds,
which were taxable and paid issuers a hefty rebate, lost their appeal when the
rebates were cut during congressional budget battles. Issuers have been slow to
warm to Obama's proposal of "America Fast Forward" bonds that follow
the same model, and which the administration says would be protected from
Hiteshew also intends to help improve liquidity, pricing
transparency and financial disclosure in the $3.7 trillion U.S. municipal bond
market. The federal government's heightened interest in the market is apparent
across many agencies, including the Securities and Exchange Commission.
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