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May 1, 2011

K-12 Tax & Spending Climate: T he Great Recession's Impact on State Pension and Retiree Health Care Costs

Pew Center on the States:

In the midst of the Great Recession and severe investment declines, the gap between the promises states made for employees' retirement benefits and the money they set aside to pay for them grew to at least $1.26 trillion in fiscal year 2009, resulting in a 26 percent increase in one year.

State pension plans represented slightly more than half of this shortfall, with $2.28 trillion stowed away to cover $2.94 trillion in long-term liabilities--leaving about a $660 billion gap, according to an analysis by the Pew Center on the States. Retiree health care and other benefits accounted for the remaining $604 billion, with assets totaling $31 billion to pay for $635 billion in liabilities. Pension funding shortfalls surpassed funding gaps for retiree health care and other benefits for the first time since states began reporting liabilities for the latter in fiscal year 2006.

Precipitous revenue declines in fiscal year 2009 severely depleted state coffers and constrained their ability to pay their annual retirement bills. States' own actuaries recommended that they contribute nearly $115 billion to build up enough assets to fully fund their promises over the long term, but they contributed only $73 billion--or 64 percent of the total annual bill. This 2009 payment represents a three percentage point decline from the previous fiscal year's contribution, when they set aside just under $72 billion toward a $108 billion requirement.

Posted by Jim Zellmer at May 1, 2011 1:28 AM
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