Report: Many state pensions underfunded
CHERRY HILL, N.J. — A public employee pension crisis for state governments has deepened to a record level even after nearly nine years of economic recovery for the nation, according to a study released Thursday, leaving many states vulnerable if the economy hits a downturn.
The massive unfunded pension liabilities are becoming a real problem not just for public-sector retirees and workers concerned about their future but also for everyone else. As states try to prop up their pension funds, it means less money is available for core government services such as education and public safety.
The annual report from the Pew Charitable Trusts finds that public worker pension funds with heavy state government involvement owed retirees and current workers $4 trillion as of 2016. They had about $2.6 trillion in assets, creating a gap of about onethird, or a record $1.4 trillion.
Larger cities and school districts across the country also have had service cuts or freezes over the years to pay for rising costs for their retirees.
Pew says that pension funds were well-funded until about 2000. Around that time, many states increased pension benefits without a way to pay for them. In some states, such as California and Illinois, courts usually find that the government must honor those commitments.
Kentucky has been roiled by weeks of protests over a bill passed by the Republican-dominated Legislature and signed by the Republican governor that makes changes to the state’s teacher retirement system in an attempt to close the funding gap. Teachers have packed the state Capitol by the thousands to protest the changes. On Wednesday, they joined the state’s attorney general, a Democrat, in filing a lawsuit seeking to overturn the law.
Just four states — New York, South Dakota, Tennessee and Wisconsin — had at least 90 percent funding. Draine said those states and some others that have repaired pension shortfalls since the Great Recession will be in better shape the next time the economy slides.