Public Pensions and the Infrastructure We Need
It's going to cost a lot of money to bring our infrastructure systems up to snuff. Public pensions could have a big role to play.
A big-city labor leader, an investment expert and a long-time senior public official start talking about public-employee pensions. Given the tenor of public discussion today, you're going to want a seat nearby, because you would expect sparks to fly. That's what I thought when I accepted an invitation to moderate a panel on pension investments at New York University's Robert F. Wagner School of Public Service.
What occurred was violent agreement.
The occasion was the third in a series of roundtable discussions to engage members of the public, government officials and other key stakeholders in New York City's long-term fiscal liabilities. The previous roundtables in the series explored pension costs and health care, and this one was focused on rethinking pension investments. (You can watch a video of the roundtable here.)
The members of the panel were Mike Fishman, the New York State president of the Service Employees International Union; Steven Lydenberg, a senior research fellow at the Hauser Center for Nonprofit Organizations at Harvard University; and Peter Goldmark, an independent consultant whose variety of previous positions includes serving as budget director of New York State.
They agreed that the first objective in pension investments should be to assure that the money would be there to pay benefit obligations when they come due. But they also agreed that it was imperative that pension funds, especially since they are using public money, be invested with an eye to more than simply trying to beat the market. They thought that, with the right controls, pensions should invest in a way to address the enormous infrastructure needs of state and local government and that doing so could, in fact, earn the funds a more than adequate return.
The American Society of Civil Engineers estimates that we need to spend $2.2 trillion to bring the nation's infrastructure systems up to snuff. The nation's public-pension systems hold at least $2.5 trillion in assets. We're only at the beginning of a discussion about how to build a synergistic connection between the mountains of cash controlled by those retirement funds and the huge hole we've dug ourselves into with regard to infrastructure.
One point that Peter Goldmark wants us to hold in mind as the discussion goes forward: Investments "must be in new, carbon-light, flexible, resource-conserving infrastructure" and not "carbon-heavy, clunky, resource-wasting infrastructure of the 19th- and 20th-century models."
That sounds right to me. For quality of life and global competitiveness, we need to build infrastructure that works for the next hundred years, not the last hundred years. And the role that public-pension funds might have in making that happen seems to be a subject worth a lot more discussion, even if we don't always find ourselves violently agreeing.