Total US state aggregate adjusted net pension liabilities (ANPL) totaled $1.25 trillion, or 119% of revenue in fiscal 2015, Moody’s Investors Service says in a new report. The results, based on compliance with new GASB 68 accounting rules, set a new ANPL baseline and are poised to rise for the next two fiscal years as market returns fall below annual targets.
“The median return for public pension plans in FY 2016 was 0.52% compared to an average assumed investment return of 7.5%,” Moody’s Vice President — Senior Credit Officer Marcia Van Wagner says. “We project that aggregate state ANPL will grow to $1.75 trillion in FY 2017 audits.”
Moody’s new report also introduces a new “Tread Water” benchmark, which measures whether states’ annual contributions to their pensions are enough to keep the unfunded net liability from growing. For FY 2015, states were evenly divided between falling short and exceeding the benchmark.
The report “States — US: Medians – Low Returns, Weak Contributions Drive Continued Growth of State Pension Liabilities,” says there were several states whose pension contributions were notably below the Tread Water mark, including Kentucky (Aa2 stable), New Jersey (A2 negative), Illinois (Baa2 negative), and Texas (Aaa stable).