There’s a $1 trillion dollar gap between what states have promised their workers in pension benefits and what they’ve actually set aside to pay those bills.
That’s the finding of a newly released report by the Pew Center on the States. States have set aside only $2.35 trillion of the $3.35 trillion they’ve promised their current and retired workers in pension, healthcare, and other retirement benefits.
According to the report, the gap is due to states’ own policy choices and lack of discipline, including:
– failing to make annual payments for pension systems at the levels recommended by their own actuaries;
– expanding benefits and offering cost-of-living increases without fully considering their long-term price tag or determining how to pay for them;
– providing retiree healthcare without adequately funding it.
Many retirement investment funds have further taken a hit during the recent recession, but Susan Urahn, the managing director of the Pew Center on the States, notes in the report that “many states shortchanged their pension plans in both good times and bad, and only a handful have set aside any meaningful funding for retiree health care and other non-pension benefits.”
So which states received the worst grades for their pension performance?
In eight states – Connecticut, Illinois, Kansas, Kentucky, Massachusetts, Oklahoma, Rhode Island, and West Virginia – more than one-third of the total pension liability was unfunded. Two additional states – Illinois and Kansas – had less than 60 percent of the necessary assets on hand.
Want to know how your state stacks up? The report provides state-by-state information here.