State government pension liabilities

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Public pensions
State public pension plans
Pension health by state
Pensions on the ballot
Terms and definitions

State government pension liabilities are the unfunded liabilities that state governments take on when they provide pension and other post-employment benefits to state government employees without simultaneously accumulating the funds to pay for those eventual liabilities.

Defined-benefit pension plans were established originally to set aside funds to pay retirement benefits to employees. These benefits are financed through the contributions of employers and employees, and the investment income derived from those contributions.

Pension plans for state government employees operated initially on a pay-as-you-go basis. Over time, most states attempted to pre-pay the cost of pension benefits for employees. Every state government reports on its pension plans in financial statements following guidelines established by the Government Accounting Standards Board.

Pre-funding and ratios

The "funding ratio" is the actuarial value of assets divided by actuarial accrued liabilities. Unfunded liabilities are the portion of accrued liabilities not offset by assets in the plan.

The funding ratio in the 1970s was 50%. In the 1990s, the ratio was 80%. In 2000, the ratio was slightly above 100%, meaning that there were at that time no unfunded pension liabilities.

Impact of 2001 recession

When the recession of 2001 took effect, the fall in the stock market brought significant losses in assets held by the state's pension funds. By 2006, the funding ratio of state pension plans had fallen to 81%. In dollar terms, this meant an accumulated nation-wide shortfall in state pension plans of $360 billion dollars.

State liabilities

Below is a chart detailing the pension liabilities for each state according to PEW and AEI.^[1][2]

See also

• California public pension reforms

External links

• Is there a gorilla in your backyard? Pension and other post-employment benefit (OPEB) liabilities (PDF)
• Pension Tsunami
• State Integrity Investigation

Footnotes

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