PENSION TIMEBOMB: State pension funds have $1 trillion shortfall - Pew Report
This is the 2nd such report issued this week on state pensions. Honestly, I try not to think about the pension timebomb. When you consider the $60 trillion in unfunded liabilities, on top of the current national debt, $1 trillion is chump change for Bernanke's printing press. In fact, $1 trillion print jobs are handled these days on the overnight shift by 'Zimbabwe Junior,' a new intern Bernanke met at a Guns N Gold Show in Southern Virginia a few months back.
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The Trillion Dollar Gap: Underfunded State Retirement Systems and the Road to Reform
$1 trillion. That’s the gap at the end of fiscal year 2008 between the $2.35 trillion states had set aside to pay for employees’ retirement benefits and the $3.35 trillion price tag of those promises.
Why does it matter? Because every dollar spent to reduce the unfunded retirement liability cannot be used for education, public safety and other needs. Ultimately, taxpayers could face higher taxes or cuts in essential public services.
A new report from the Pew Center on the States, The Trillion Dollar Gap: Underfunded State Retirement Systems and the Road to Reform, shows why states must take strong action now—or taxpayers will suffer later.
To a significant degree, the $1 trillion reflects states’ own policy choices and lack of discipline:
- • failing to make annual payments for pension systems at the levels recommended by their own actuaries;
- • expanding benefits and offering cost-of-living increases without fully considering their long-term price tag or determining how to pay for them; and
- • providing retiree health care without adequately funding it.
Key Findings
Retirement benefits provide a reliable source of post-employment income for government workers, and they help public employers retain qualified personnel. For states that have not been disciplined about fulfilling their obligations, the financial pressure builds each year.
- • In 2000, just over half the states had fully funded pension systems. By 2006, that number had shrunk to six states. By 2008, only four—Florida, New York, Washington and Wisconsin—could make that claim.
- • In eight states—Connecticut, Illinois, Kansas, Kentucky, Massachusetts, Oklahoma, Rhode Island and West Virginia—more than one-third of the total pension liability was unfunded. Two states—Illinois and Kansas—had less than 60 percent of the necessary assets on hand.
- • Nine states were deemed solid performers, having enough assets to cover at least 7.1 percent—the 50-state average—of their non-pension liabilities. Only two states—Alaska and Arizona—had 50 percent or more of the assets needed.
- • Forty states were classified as needing improvement, having set aside less than 7.1 percent of the funds required. Twenty of these have no assets on hand to cover their obligations.
Read more about the roots of the problem, the factors driving change and the states that have promising approaches to reform. Download the full report. (Adobe PDF)
State Fact Sheets
To help policy makers and the public understand the challenges states are facing, Pew assessed all 50 states on how well they are managing their public sector retirement benefit obligations. View the state fact sheets.
Methodology
Pew’s analysis for “The Trillion Dollar Gap” is based on data from states’ own Comprehensive Annual Financial Reports, pension plan system annual reports and actuarial valuations. Pew researchers analyzed the funding performance of 231 state-administered pension plans and 159 state-administered retiree health care and other non-pension benefit plans, which include some localities’ and teacher plans.
Media Inquiries
If you are with the media and would like additional information on The Trillion Dollar Gap, please contact Matt Mulkey, communications manager, The Pew Center on the States, 202.862.9864.
View Full Report:
February 18, 2010 -
The Trillion Dollar Gap (Adobe PDF)
Feb 18, 2010 at 12:30 PM
Reader Comments (6)
State Pension Funds Fall Off $1 Trillion Cliff
The Trillion Dollar Gap: Underfunded State Retirement Systems and the Road to Reform
WASHINGTON (Reuters) - U.S. states face a total shortfall of at least $1 trillion in their funds for employees' pensions and retirement benefits, and their financial problems are quickly mounting, according to a report released by the Pew Center on the States on Thursday.
Posting rages at IRS, claims, "I have had all I can stand"
FEBRUARY 18--The man suspected of intentionally crashing an airplane into a Texas office building today appears to have posted a lengthy online diatribe attacking the Internal Revenue Service and declaring that, "I know I'm hardly the first one to decide I have had all I can stand." The manifesto, which you'll find below, is dated "2/18/10" and is signed "Joe Stack (1956-2010)." Andrew Joseph Stack, 53, has been identified as the man who flew a small plane into an Austin building housing IRS offices. The statement was uploaded to the front page of a web site that was registered in 2003 by a Joe Stack, who listed an address in San Marcos, Texas, which is about 35 miles south of Austin. The online posting is titled "Well Mr. Big Brother IRS man... take my pound of flesh and sleep well." Cached versions of Stack's web site, which described his software development consulting business, noted that he founded the firm in southern California in 1983, and eventually relocated to the Austin area to "lend a hand to the growing high technology industry in South-Central Texas." (6 pages)
http://www.thesmokinggun.com/archive/years/2010/0218102stack1.html
http://www.nytimes.com/2010/02/18/business/economy/18pew.html?em
http://www.nytimes.com/2010/02/18/us/18campers.html?em