State Pensions Update - Pew

State Pensions Update - Pew:

The Widening Gap Update

States are $1.38 Trillion Short in Funding Retirement Systems

• States' Fiscal Health
• Contact Nicole Dueffert 202.552.2274
• June 18, 2012

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• State Fact Sheets

Quick Summary

The gap between the promises states have made for public employees’ retirement benefits and the money they have set aside to pay these bills was at least $1.38 trillion in fiscal year 2010, according to Pew's latest comprehensive analysis on pension and retiree health care funding.

View individual state fact sheets in the drop-down menu below.

Table of Contents

States continue to lose ground in their efforts to cover the long-term costs of their employees’ pensions and retiree health care. In fiscal year 2010, states were $1.38 trillion short of having saved enough to pay their retirement bills, a nine percent increase from the year before.

Over the last three years, the majority of states put reforms in place to better manage their retirement bills, but there is more work to be done to get back on solid fiscal footing.

See how the states measured up in retiree benefits funding

Key Findings

Pensions

Pension plans represent more than half of the retiree benefit funding shortfall. Experts say that a healthy pension system should be at least 80 percent funded.

• In 2010, only Wisconsin had fully funded its pension plan and 34 states were below the 80 percent threshold.
  
• Connecticut, Illinois, Kentucky, and Rhode Island were the worst among the states, with pensions funded under 55 percent in 2010.
  
• North Carolina, South Dakota, Washington, and Wisconsin were the best among the states, with pensions funded at 95 percent or better in 2010.
  
• Keeping up with the annual required contribution is perhaps the most effective way that states can responsibly manage their long-term liabilities for public sector retirement benefits. Pew's research shows that states that consistently make their full payments have better funded retirement systems and smaller gaps.

Retiree Health Care

States only have 5 percent of the funds needed to pay for their retirees’ health care and other non-pension benefits—such as life insurance.

•  17 states did not set aside any money to fund their retiree health care liabilities.
    
•  Only seven states had funded at least 25 percent of health care liabilities— Alaska, Arizona, North Dakota, Ohio, Oregon, Virginia, and Wisconsin.
    
•  Alaska and Arizona are the best among states, with nearly 50 percent of their health care liabilities funded.