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Project on State and Local Government Finance

Financing State and Local Government

The Project on State and Local Government Finance (SLGF) is dedicated to conducting research on fiscal issues in state and local governments in the United States. Our central mission is to produce objective, rigorous, and in-depth analysis to inform and educate policy makers and stakeholders of state and local governments, to help them make better financial management decisions.

Our research covers a broad range of topics, including public pension systems, municipal finances, budgetary and fiscal institutions, and tax analysis. SLGF is currently working on a major project in which it is analyzing risks related to the New York City Teachers Retirement System, and how those risks could affect the finances of New York City, and how they could affect stakeholders in the pension plan and in New York City.

Project on State and Local Government Finance
319 Milne Hall

135 Western Avenue
Albany, NY 12222
United States


Current Projects

Analyzing Risks and Issues Relating to the New York City Teachers’ Retirement System

The State and Local Government Finance (SLGF) team recently has embarked on a new project, Analyzing Risks and Issues Relating to the New York City Teachers’ Retirement System. This project will analyze costs and risks of the New York City Teachers’ Retirement System (TRS) under current benefit, funding, and investment policies and under potential alternative policies. It will place this analysis in the context of the New York City budget and in relation to other New York City public pension funds. This broad view is important because when TRS suffers downside risks, or benefits from upside risks, other City pension funds are likely to face similar risks, and so the aggregate implications for the City budget are likely to be greater than those for TRS alone.

In addition to the analytic work, the project entails considerable outreach to and engagement with stakeholders in the New York City Teachers’ Retirement System, including stakeholders in New York City more broadly.

The project is being led by New York University’s Marron Institute of Urban Management, with Rockefeller College as a sub-awardee to conduct pension fund modeling. SLGF co-director Don Boyd is leading the analytic work under a direct arrangement with the Marron Institute, and co-director Gang Chen is the Rockefeller College principal investigator on the project. The work is supported financially by the Equable Institute, a new 501(c)(3) foundation that is focusing its early efforts on retirement security issues. Equable is a nonpartisan non-profit organization that seeks to educate and inform employees, retirees, labor, management, and taxpayers about how to create retirement plan sustainability and accountability without sacrificing future income security.

Read the full report.


Analyzing the Interplay between Public Pension Finances and Governmental Finances: Lessons from Linking an Economic Model to a Pension Fund Model

Public pension funds invest in stock, bonds, and other assets in an effort to keep the costs to governments of funding pensions low. Researchers have examined the investment-related risks to public pension funds, to the governments that contribute to them, and to stakeholders in pension funds and governments, using stochastic simulation models of pension fund finances.

These models generally use simple investment return assumptions, such as that returns are drawn from a normal distribution, are independent from year to year, and are not correlated with the governmental tax revenue needed to pay pension contributions. Because investment returns and tax revenue may both be correlated with underlying economic conditions, this could understate the risks that future increased contributions will be difficult to afford: a poor economy may dampen investment returns and cause tax revenue to fall short, compounding fiscal pressures on governments if the increases come when tax revenues are low.

This paper addresses this issue by using a regime-switching macroeconomic model of recession and growth to drive (1) a model of pension fund returns driven by stock and bond returns, and (2) models of state tax revenue driven by real GDP and stock returns, which influence the capital gains component of income taxes. It is parameterized using retrospective and prospective estimates. It shows that the correlated risk is real and significant, meaning that political risks related to pensions are greater than often understood. The models show that these risks are greatest for governments that rely heavily on income taxes.

Read the full report.

Publications and Reports

Publications and reports by team members in current and previous positions.

January 2021

March 2020

February 2019

August 2017

July 2017

March 2017

February 2017

January 2017

December 2016

November 2016

June 2016

January 2016

January 2014


Donald Boyd
Donald Boyd
Senior Research Fellow
Gang Chen
Gang Chen
Associate Professor, PhD Director