States face serious pension woes: $1 trillion short
States' pension woes only have grown worse in the past year, a new study by the Pew Center for the States finds. This problem can't be laid at the door of the recession.
At the core of state budget problems in the US is something that goes beyond the recent recession: poorly managed pension systems for public employees.
That’s the conclusion of an in-depth analysis released Thursday by the Pew Center on the States in Washington. The unfunded liabilities exceed $1 trillion and could force difficult choices upon many states, the nonprofit research group said.
The problem is not a new one, but it has grown worse in the past year. And, on a day when President Obama called for a new commission to propose fixes to the federal budget, it’s a reminder that Congress doesn’t have a monopoly on the idea of making promises without figuring out how to pay for them.
“To a significant degree, the $1 trillion gap reflects states’ own policy choices and lack of discipline,” the Pew Center report concludes.
The problem behaviors by states include failing to make the recommended annual payments into state pension funds and expanding benefits without considering the long-term cost.
The severity of the funding gap varies widely among the states, but few are trouble-free:
• As of 2008, there were 21 states with funding levels below 80 percent of what their actuaries recommend. The same number of states have made annual contributions that fall at least 10 percent short of what actuaries recommend.