Betrayed: Pensioners and Taxpayers
September 16, 2013
Comprehensive research into the funded status of state-level defined benefit public pension plans reveals that public employee retirement promises are underfunded by $4.1 trillion. Combined, state public pension plans are just 39 percent funded, says Cory Eucalitto, an editor and author at State Budget Solutions.
States facing a particularly large unfunded liability at a per capita level and as a percentage of their annual gross state product include Illinois, Ohio, New Jersey, Oregon, Connecticut, Nevada, New Mexico, Hawaii and Alaska.
With rejection of an unsatisfactory approach to calculating public pension liabilities, the Governmental Accounting Standards Board and Moody's have joined a chorus of financial economists and other observers warning that pension funding practices are dangerous for both taxpayers and public employees alike.
Below are funded ratios for various states. A funded ratio presents a plan's assets as a percentage of liabilities, or the amount of money owed in benefits. The funded ratio is used as one of the primary measurements of a pension plan's overall funding health. It provides an additional layer of context that an unfunded liability alone does not.
- By this measure, the five most poorly funded states are Illinois (24 percent), Connecticut (25 percent), Kentucky (27 percent) and Kansas (29 percent), along with Mississippi, New Hampshire and Alaska tied at 30 percent funded.
- At the other end of the spectrum, Wisconsin, the most well-funded state in the country, has just a 57 percent funded ratio, followed by North Carolina (54 percent), South Dakota (52 percent), Tennessee (50 percent) and Washington (49 percent).
- The unfunded liability of all plans in this study, $4.1 trillion, works out to $13,145 per capita.
- The states with the largest unfunded liability per person are Alaska ($32,425), Ohio ($24,893), Illinois ($22,294), Connecticut ($21,378) and New Mexico ($20,530).
- On the other hand, the states with the smallest unfunded liability per person are Tennessee ($5,676), Indiana ($6,581), North Carolina ($6,874), Nebraska ($7,212) and Arizona ($7,688).
Source: Cory Eucalitto, "Promises Made, Promises Broken - The Betrayal of Pensioners and Taxpayers," State Budget Solutions, September 3, 2013.
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