A newly released report from the Government Accountability Office (GAO) has categorically rejected conclusions drawn by Joshua Rauh of the Kellogg School of Management. While Asst. Prof. Rauh’s report generated much discussion and media coverage at the time, LASERS pointed out that the report raised alarm by erroneously suggesting that the pension system would run out of funds within 10 years. Unfortunately, the author based his projections on investment return rates of approximately five percent and completely ignored the amortization payments made to LASERS. The GAO found:
Referring to the May 15, 2010 report by Joshua Rauh that projected some notably early fund exhaustion dates, "the projected exhaustion dates are ... not realistic estimates of when the funds might actually run out of money."
As LASERS pointed out at the time; the report substituted academic theory for actual long-term market experience, drawing conclusions that are unfounded and alarmist. This type of academic analysis is not a true reflection of public pension solvency or actuarial soundness. And the presented analysis was not a realistic or accurate measure for public pensions. Read LASERS original response to the Rauh report here.
The new GAO report, which is "the most comprehensive government study of public pension plans to date," validates "that the vast majority of plans are adequately funded to meet their current obligations and have adopted systemic and operational reform to ensure their long-term sustainability."
Read the complete GAO report here.
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