Study: Some public pensions could dry up

CHERRY HILL, N.J. — Many pension funds for public workers already owe far more in retirement benefits than they have in the bank, and the problem will only grow worse if the economy slows down, according to a report released Thursday.

The study from The Pew Charitable Trusts found that the New Jersey and Kentucky funds are in such perilous shape that they risk running dry.

“Even after eight years of economic recovery — eight straight years of stock market gains — the public pension plans are more vulnerable than they’ve ever been to the next recession,” researcher Greg Mennis said.

Governments have been ramping up contributions to the funds to help cover the promises they’ve made to retirees, but that leaves less money to spend on schools, police, parks and other core government services.

Another option is reducing pensions. A plan to do that in Kentucky led to teacher walkouts.

The Pew study, published by the Mossavar-Rahmani Center for Business and Government at Harvard University, examines what would happen to pension funds in 10 states under various economic scenarios.

If a fund doesn’t bring in enough money to cover its promised retirement costs, the state would have to make up the difference. In New Jersey, that would mean spending at least $2 billion more a year.

“These findings don’t come as a surprise and underscore the need to bolster the state’s surplus,” said Jennifer Sciortino, a spokeswoman for the state Treasury Department.