Public pension health by state

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Public pensions

Pension health by state
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Pension health is a term used to describe the overall state of a pension system. It can be difficult to gauge pension health in each state; studies use a variety of calculations to determine a pension system's average liabilities, unfunded liabilities, funded ratio, and other metrics. The information on this page comes from two reports by two separate organizations: the Pew Charitable Trusts and the Hoover Institution.

HIGHLIGHTS

The Pew Charitable Trusts’ annual analysis of pension health for 2018 notes that “at $1.24 trillion, the 50-state pension funding gap—the difference between a state retirement system’s assets and its liabilities—improved slightly in 2018 primarily due to strong investment performance. However, after a decade of economic recovery, the aggregate pension funding gap remains historically high and could increase by up to $500 billion based on market returns through March 2020, including recent losses related to the COVID-19 pandemic. In addition, the disparity between well-funded and underfunded state retirement systems is greater than it has ever been.”

The Hoover Institution’s "Hidden Debts, Hidden Deficits" 2019 update highlights that “the total unfunded pension debt nationwide to public employees rose between 2015 and 2017 from $3.846 trillion to $4.145 trillion. More important, in FY2017, state and local governments contributed $185 billion to pension payments, or 8.0 percent of every dollar they raised in revenue, up dramatically from 4.9 percent in FY2015. However, this amount still proved insufficient, as the true annual cost of keeping pension liabilities from rising would be approximately $338 billion. This ‘true cost’ figure amounts to over 14 percent of all the revenue generated by state and local governments, or a whopping 21 percent of their tax revenue."

Pew study[edit]

In 2018, the Pew Charitable Trusts, an independent research group, published a report on the financial health of public pension plans in the United States. According to Pew, "In 2016, the state pension funds in this study cumulatively reported a $1.4 trillion deficit—representing a $295 billion jump from 2015 and the 15th annual increase in pension debt since 2000. Overall, state plans disclosed assets of just $2.6 trillion to cover total pension liabilities of $4 trillion."^[1]

The table below provides information about pension plan liabilities and debt, funded ratios, and net amortization. According to the Pew Charitable Trusts, "Net amortization measures whether total contributions to a public retirement system would have been sufficient to reduce unfunded liabilities if all expectations had been met for that year." This metric comprises two parts: an employer contribution benchmark, which is the amount the employer needed to contribute to the plan in a year in order to reduce pension debt, and the percentage of that amount that was actually paid. A positive net amortization percentage (i.e., one exceeding 100 percent) indicates that plans could expect to see a reduction in their debt.^[2]

Pension health metrics from the Pew Charitable Trusts report, fiscal years 2012-2016 (dollars in millions)
State	2016		Funded ratio					Net amortization
State	Liability	Pension debt	2012	2013	2014	2015	2016	Employer benchmark	Percent paid
Alabama	$51,174	$16,778	66%	66%	70%	67%	67%	$1,484	84%
Alaska	$21,299	$7,949	55%	52%	60%	67%	63%	$637	75%
Arizona	$67,414	$26,670	72%	72%	64%	63%	60%	$2,114	85%
Arkansas	$31,036	$7,174	71%	74%	86%	82%	77%	$711	105%
California	$550,349	$168,016	77%	72%	76%	74%	69%	$16,284	82%
Colorado	$94,238	$50,842	63%	61%	64%	60%	46%	$2,367	63%
Connecticut	$63,890	$37,452	49%	48%	51%	49%	41%	$2,571	101%
Delaware	$10,857	$2,050	88%	88%	92%	89%	81%	$209	138%
Florida	$178,799	$36,905	82%	81%	91%	87%	79%	$3,028	101%
Georgia	$106,392	$25,773	81%	79%	83%	81%	76%	$2,338	100%
Hawaii	$27,439	$13,369	59%	60%	64%	62%	51%	$1,151	89%
Idaho	$16,302	$1,997	85%	86%	95%	92%	88%	$262	137%
Illinois	$219,353	$141,169	40%	39%	41%	40%	36%	$10,370	75%
Indiana	$47,998	$17,743	61%	65%	69%	65%	63%	$1,339	148%
Iowa	$35,389	$6,498	80%	81%	87%	85%	82%	$717	108%
Kansas	$26,411	$9,218	56%	60%	67%	65%	65%	$869	208%
Kentucky	$63,286	$43,418	47%	44%	41%	38%	31%	$2,855	41%
Louisiana	$51,377	$20,680	56%	58%	65%	63%	60%	$1,625	132%
Maine	$16,031	$3,641	79%	80%	86%	83%	77%	$298	125%
Maryland	$70,317	$24,709	64%	65%	71%	68%	65%	$2,139	93%
Massachusetts	$90,715	$38,497	61%	61%	67%	62%	58%	$2,997	92%
Michigan	$87,708	$31,600	61%	60%	67%	64%	64%	$2,810	115%
Minnesota	$108,853	$50,909	75%	75%	82%	80%	53%	$1,525	85%
Mississippi	$45,513	$18,050	58%	58%	67%	62%	58%	$1,355	79%
Missouri	$67,494	$15,728	78%	77%	85%	81%	77%	$1,341	112%
Montana	$14,126	$4,071	64%	73%	76%	75%	71%	$328	103%
Nebraska	$13,572	$1,516	79%	80%	93%	91%	89%	$178	168%
Nevada	$48,588	$13,481	71%	69%	76%	75%	72%	$1,873	87%
New Hampshire	$12,849	$5,365	56%	57%	66%	65%	58%	$363	104%
New Jersey	$243,591	$168,243	65%	63%	42%	37%	31%	$9,567	33%
New Mexico	$39,030	$13,494	63%	67%	74%	71%	65%	$1,004	75%
New York	$202,651	$19,011	87%	89%	N/A	98%	91%	$3,501	152%
North Carolina	$98,639	$11,519	95%	96%	99%	95%	88%	$1,301	138%
North Dakota	$7,135	$2,434	63%	61%	73%	70%	66%	$194	93%
Ohio	$202,060	$56,541	67%	74%	80%	76%	72%	$3,611	91%
Oklahoma	$38,891	$10,937	65%	67%	81%	79%	72%	$919	143%
Oregon	$77,094	$15,012	91%	96%	104%	92%	81%	$1,447	70%
Pennsylvania	$145,037	$68,817	64%	62%	60%	56%	53%	$6,083	82%
Rhode Island	$11,119	$5,143	58%	58%	61%	57%	54%	$405	100%
South Carolina	$52,184	$24,117	65%	63%	61%	58%	54%	$1,624	81%
South Dakota	$10,851	$338	93%	100%	107%	104%	97%	$36	331%
Tennessee	$45,840	$2,712	92%	94%	99%	95%	94%	$647	159%
Texas	$218,843	$59,034	82%	80%	79%	76%	73%	$5,650	71%
Utah	$33,195	$4,651	76%	80%	88%	86%	86%	$898	125%
Vermont	$5,878	$2,100	70%	69%	75%	68%	64%	$163	91%
Virginia	$91,652	$25,289	65%	66%	75%	75%	72%	$2,533	101%
Washington	$89,938	$14,433	95%	88%	90%	87%	84%	$1,768	123%
West Virginia	$18,258	$5,133	63%	67%	78%	77%	72%	$420	156%
Wisconsin	$93,433	$853	100%	100%	103%	98%	99%	$967	103%
Wyoming	$10,532	$2,817	80%	79%	79%	73%	73%	$291	63%
Totals in the U.S.	$3,971,623	$1,353,892	72%	72%	75%	72%	66%	$109,169	88%
Sources: The Pew Charitable Trusts, "State Pension Funding Gap 2016 Downloadable Data (XLS)," accessed August 24, 2018 The Pew Charitable Trusts, "The State Pension Funding Gap: 2016," April 12, 2018

Hoover Institution report[edit]

According to a report by the Hoover Institution released on May 15, 2017, "the vast majority of state and local governments continue to understate their pension costs and liabilities by relying on investment return assumptions of 7-8 percent per year." The report stated that, as of fiscal year 2015, the total unfunded liabilities of state and local pension systems totaled $3.846 trillion. The report distinguishes between stated unfunded liabilities according to state governments and the market value of those liabilities; the Hoover Institution calculates market value by taking into account the ongoing interest costs and service costs of the plans, which include changes in payments year to year. According to the report, this represented "2.8 times more than the value reflected in government disclosures." The report also stated that, in all states except Alaska, there were large differences between the amount of a state's revenue that must have been contributed to pension funds to prevent unfunded liabilities under the Hoover Institution's expected return rate and the amount actually contributed. The table below provides information from the Hoover Institution report for all states.^[3]

Pension health metrics from the Hoover Institution report, fiscal year 2015 (dollars in thousands)
State	Unfunded liability		Percent of revenue
State	Stated	Market Value	Contributed	Required to prevent rise in unfunded liabilities (expected return)	Required to prevent rise in unfunded liabilities (market value)
Alabama	$16,666,067	$46,529,904	4.3%	4.9%	9.4%
Alaska	$6,770,678	$17,732,398	53.1%	13.6%	18.1%
Arizona	$26,216,255	$84,754,587	4.8%	5.0%	11.2%
Arkansas	$5,955,638	$23,391,060	4.9%	4.3%	10.6%
California	$242,746,943	$769,407,011	7.3%	9.3%	18.6%
Colorado	$29,583,144	$66,387,689	3.9%	5.4%	9.1%
Connecticut	$30,066,258	$68,363,982	8.9%	8.2%	11.0%
Delaware	$1,282,903	$2,788,025	3.8%	2.9%	4.7%
Florida	$19,184,191	$121,227,825	2.9%	2.0%	7.4%
Georgia	$22,150,078	$92,310,089	4.2%	4.0%	9.9%
Hawaii	$8,732,931	$14,424,656	7.8%	8.6%	10.2%
Idaho	$1,283,211	$8,321,136	3.9%	2.8%	9.2%
Illinois	$188,066,253	$360,521,175	11.1%	16.4%	23.4%
Indiana	$17,370,622	$31,892,251	4.4%	2.1%	4.1%
Iowa	$5,556,605	$23,786,599	3.0%	2.5%	7.7%
Kansas	$9,086,061	$23,635,990	3.4%	3.8%	7.3%
Kentucky	$41,246,783	$67,895,376	6.6%	10.8%	15.0%
Louisiana	$22,713,834	$54,301,533	9.7%	6.7%	10.6%
Maine	$2,692,282	$9,118,321	4.2%	2.8%	7.2%
Maryland	$25,463,188	$68,906,681	5.4%	5.1%	10.1%
Massachusetts	$37,302,289	$84,193,937	4.0%	4.5%	7.6%
Michigan	$33,451,545	$86,498,436	5.3%	4.2%	5.9%
Minnesota	$15,831,199	$60,585,361	2.7%	3.0%	8.6%
Mississippi	$15,617,381	$39,685,975	5.8%	6.1%	11.6%
Missouri	$13,163,522	$50,652,269	4.8%	3.6%	10.9%
Montana	$3,466,428	$9,939,681	5.4%	4.9%	11.2%
Nebraska	$2,658,329	$11,180,481	2.8%	1.8%	6.8%
Nevada	$11,476,612	$38,929,799	8.9%	10.5%	21.1%
New Hampshire	$3,961,527	$9,003,454	3.8%	3.6%	6.5%
New Jersey	$135,700,565	$161,856,267	3.4%	8.1%	12.5%
New Mexico	$10,798,566	$29,051,980	4.9%	5.9%	13.3%
New York	$54,828,687	$284,212,887	8.2%	4.9%	11.5%
North Carolina	$11,590,655	$63,012,142	2.9%	2.2%	7.7%
North Dakota	$1,969,135	$5,763,351	1.7%	1.8%	4.4%
Ohio	$58,898,663	$178,364,249	5.1%	4.9%	12.2%
Oklahoma	$7,674,017	$25,660,161	5.7%	3.5%	8.3%
Oregon	$8,616,500	$39,838,047	4.2%	2.8%	10.8%
Pennsylvania	$69,845,916	$148,701,055	5.3%	6.8%	9.2%
Rhode Island	$4,983,117	$11,021,609	5.3%	4.9%	7.3%
South Carolina	$21,352,395	$48,244,066	4.0%	4.8%	7.5%
South Dakota	-$325,423	$6,316,207	2.6%	0.0%	10.6%
Tennessee	$2,297,119	$16,898,249	1.9%	1.2%	4.6%
Texas	$69,352,150	$243,717,755	3.6%	3.4%	9.7%
Utah	$4,463,494	$19,806,611	5.8%	4.2%	10.6%
Vermont	$1,876,813	$4,965,049	3.2%	3.0%	6.3%
Virginia	$25,487,525	$68,802,026	4.9%	4.8%	9.8%
Washington	$12,737,525	$67,435,873	3.5%	3.4%	12.7%
West Virginia	$4,090,284	$12,182,477	5.9%	3.6%	6.9%
Wisconsin	$2,671,620	$51,735,307	2.8%	1.6%	10.9%
Wyoming	$2,730,654	$7,385,737	2.6%	3.3%	9.0%
Source: Hoover Institution, "Hidden Debt, Hidden Deficits: 2017 Edition," May 15, 2017

Footnotes[edit]

[Pew2018-1] The Pew Charitable Trusts, "The State Pension Funding Gap: 2016," April 12, 2018

[2] The Pew Charitable Trusts, "The State Pension Funding Gap: 2014," August 24, 2016

[3] Hoover Institution, "Hidden Debt, Hidden Deficits: 2017 Edition," May 15, 2017

[1]

[2]

[3]

Public pension health by state

Contents

Pew study[edit]

Hoover Institution report[edit]

See also[edit]

Footnotes[edit]