The funding deficit faced by U.S. states’ public employee retirement plans grew 26% over the course of a year, according to a new report. According to a report released today by the Pew Center on the States, the gap between the pension and health benefits that state governments have promised their employees in retirement and the money that has actually been set aside to fund these commitments grew to at least $1.26 trillion nationwide in fiscal 2009, up from $1 trillion a year earlier.
State pension plans make up just over half of the shortfall. According to the report, The Widening Gap: The Great Recession’s Impact on State Pension and Retiree Health Care Costs, state governments have an estimated $2.28 trillion in pension assets available to pay $2.94 trillion in liabilities, resulting in a $660-billion shortfall. In total, the report indicates that state pensions are 78% funded, down from 84% in 2008. The remaining $604-billion gap is made up of retiree healthcare and other non-pension benefit commitments. The shortfall for pension funding surpassed the funding gap for retiree benefits at the end of fiscal 2009 for the first time since states began reporting liabilities in 2006.
New York was the only state to report a surplus, with a reported funding level of 101%. Retiree pension and benefits plans for 31 states were funded below the 80% threshold recommended by the U.S. Government Accountability Office, with West Virginia and Illinois reporting funding levels of just 56% and 51%, respectively.
Researchers at The Pew Center examined the performance of 231 pension plans and 162 other retirement benefits plans. The Center says figures in the report are likely conservative, because they use states’ own assumptions about average investment returns.