Research Programs

Pension Policy: Enhancing retirement security while restoring PBGC finances

44 million employees and retirees rely on the Pension Benefit Guaranty Corporation (PBGC) to help protect $1.5 trillion worth of promised pension payments. Unfortunately, PBGC faces an $11.2 billion deficit in its principal program, as of September 2003, a dramatic deterioration from the $7.7 billion surplus just two years earlier.

COFFI is currently helping inform the policy debate on fixing PBGC and related pension issues. Please see our papers:

 

COFFI intends to publish a comprehensive listing of pension policy options later this year. The paper will not advocate particular positions, but will outline the options and their advantages and disadvantages.

 

Budget Process: Estimating the True Costs to the Government

Congress and the Administration need to know the likely eventual cost to the government of the programs they put in place and of the operational decisions made annually, just as private sector companies need accurate bottom line measurements. Lending programs are currently judged by complex annual budget subsidy calculations. Please see our paper:

 

Misleading measurements lead to bad policy decisions. Two of COFFI’s research projects are intended to improve these measurements.

Improving accuracy of budget costs for lending programs. The Federal Credit Reform Act of 1990, supplemented by guidance from the Office of Management and Budget (OMB), lays out the rules for calculating the cost shown in the budget for each lending program. These budget numbers largely determine the level and type of activity authorized by Congress. Unfortunately, the true economic costs can be significantly mis-stated under these rules.

Designing sensible budget calculations for insurance programs. Unlike lending, there is no mechanism under current law for estimating the economic costs of insurance provision. The budget costs are shown on a cash basis, which does not allow a provision to be set aside for future payments on policies that pay out over multiple years or where there is a low probability of a severe event.

 

Public/Private Partnerships: Deciding how to work with the private sector

The federal financial institutions sometimes directly provide loans or insurance and sometimes guarantee private-sector loans or accept the insurance underwriting risk of privately provided insurance. For example, the Education Department provides direct student loans and also guarantees loans of banks with which it competes. There is not a consistent framework applied to the decisions about which way to go.

COFFI will engage in research to devise a consistent and sensible framework for cooperation with the private sector.

 

Administrative Rationalization: Managing More Effectively

No one would design a financial institution in the haphazard way that the federal lending and insurance agencies have evolved. There is relatively little coordination across “product lines,” such as student loans, housing loans, small business loans, etc. Loan origination, servicing, and other core functions can be structured quite differently across agencies without apparent reason. There is some coordinated effort to diffuse “best practices,” particularly in problem areas such as technology, however there is much more that could be done. Note that it is not our hypothesis that everything should be centralized or even standardized, but we do believe that there will be substantial benefits from conscious, integrated, coordination efforts.

COFFI is continually searching for ways to enhance such coordination.

 

Human Resource Issues: Finding, training, and keeping good people

Federal financial institutions are especially hard hit by the human capital issues facing the entire government. These agencies are businesses and they compete with and partner with the private sector to an unusual extent for a government entity. Further, there has been a massive transformation in how these competitors and partners do business that has generally not been matched by changes at the agencies. Aggravating all this is the extremely high compensation levels at private sector financial institutions that create a vast disparity with federal pay. Taken together, these structural factors create issues of recruitment, retention, training, and motivation.

COFFI is actively exploring collaborations with other organizations and researchers focused on government human resource issues.