Some American states’ public pensions are so underfunded that liabilities exceed revenue, according to Moody’s.
The credit rating agency’s report finds that nine American states had liabilities that were higher than their revenues in fiscal 2011 while nine had ratios of less than 20%. The median value for all 50 states was 45%.
The states with the highest adjusted pension liabilities relative to revenues were Illinois with a ratio of 241%, followed by Connecticut (189.7%), Kentucky (140.9%), New Jersey (137.2%), Hawaii (132.5%), Louisiana (130.2%), Colorado (117.5%), Pennsylvania (105%), Massachusetts (100.4%) and Maryland (99.5%).
“The largest accumulated liabilities most often reflect management decisions not to fund contributions at levels meeting actuarial guidelines,” says Timothy Blake, a Moody’s managing director.
“In recent years, we have downgraded six of the 10 states with the largest pension burdens due to the growing size of their pension obligations, which have been exacerbated by frequent underfunding.”
The level of state contributions to cover pension costs of teachers and other local government employees is a significant factor in the size of state liabilities.
The largest pension burdens are also associated with states that directly cover the cost of local school teacher pensions.
The states with the lowest pension liabilities relative to revenues were Nebraska (6.8%), Wisconsin (14.4%), Idaho (14.8%), Iowa (16.1%), New York (16.6%), North Carolina (18.3%), Florida and Tennessee (both 19.2%), Ohio (19.6%) and South Dakota (20.7%).
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