Ticking retirement timebomb? Unfunded state pension liabilities grow to $8.28 trillion

Via Just the News

State pensions are sitting on a global time bomb - Expat Money Help

Unfunded state pension liabilities have climbed to $8.28 trillion, or nearly $25,000 for every person in the United States, according to a new report from the American Legislative Exchange Council.

The American Legislative Exchange Council released the latest edition of its report on pensions in all 50 states Thursday. The report, “Unaccountable and Unaffordable 2021,” shows just a handful of states with outsize pension liabilities account for a large share of overall pension debt in the U.S.

The report looked at 290 state-administered government pension plans and their assets and liabilities from fiscal year 2012 to fiscal year 2020. An example of state-administered government pension plans in Illinois would cover state employees, teachers, university workers, judges and lawmakers.

The states with the most unfunded liabilities were California ($1.53 trillion), Illinois ($533.72 billion), Texas ($529.70 billion), New York ($508.70 billion) and Ohio ($429.53 billion). These five states alone account for more than $3.5 trillion in unfunded liabilities, or about 43% of all unfunded liabilities in the U.S.

The bottom 10 states make up $4.9 trillion, or 59.36% of all unfunded liabilities, according to the ALEC report. On a per capita basis, the bottom five state were Alaska ($42,829), Illinois ($41,656.79), Connecticut ($40,427.58), Hawaii ($39,939.43), New Jersey ($39,849.02) and California ($38,713.16).

“As state pension plans invest their funds in increasingly risky assets, the gap between expected rates of return and actual rates of return widens, with results falling far short of expectations,” the authors of the report wrote. “When investment returns fail to meet expectations, taxpayers and plan members must make up the difference through increased contributions.”

The states with the least unfunded pension liabilities were Vermont ($14.43 billion), South Dakota ($14.44 billion), North Dakota ($15.13 billion), Delaware ($18.46 billion) and Wyoming ($18.71 billion). On a per capita basis, the lowest were Tennessee ($8,511.92), Indiana ($10,188.66), Nebraska ($13,370.44), Florida ($14,062.16) and Idaho ($15,918.74).

No state in the U.S. has fully funded its pension plans. The state with the highest funding ratio in the nation is Wisconsin at 56% and New Jersey was the lowest at 18%.

“Many experts feared dramatic pension investment losses in 2020,” the authors wrote. “Even in years where investment returns beat the assumed return, public pensions cannot invest their way out of the problem of growing unfunded liabilities. … The problems of pension underfunding are structural. Poor assumptions, over promising benefits, chasing returns, and political investment strategies plague public pensions across the country.”

The authors call for pension changes across the country. They further noted that those efforts should be while states are still flush with cash from federal COVID-19 programs.

Jonathan Williams, the chief economist and executive vice president of policy for the American Legislative Exchange Council, said the first step states need to take to change course is to stop making the problem worse.

“When you are in the hole, the first step is to stop digging it deeper,” he said. “Right now, states are in a historically strong position when it comes to cash flow. There’s a lot of money sloshing around state capitals right now. One of the things that can be done with the revenue growth from the state level is to pay down current unfunded liabilities.”

States also need to examine the structure of their pension plans and switch from defined benefit plans to 401(K)-style defined contribution plans, Williams said.

“Many of the success stories in the states where we’ve seen states really improve on their unfunded liabilities is by transitioning new hires to more of a hybrid or cash balance or defined contribution type of approach,” he said.

The report singled out the structural pension issues in Illinois.

“In some of the worst cases, states ignore the [actuarially determined contribution] and instead use state statute to contribute less than the ADC each year,” the authors wrote. “Such is the case with Illinois. … Illinois uses state statute to contribute less than its ADC payment, leading to the massive growth of unfunded liabilities. This practice did not change in FY 2019 or FY 2020.”

Illinois spends about 25% of its annual general fund budget on pensions, but has failed to make a significant dent in its overall pension burden. The state’s pension protection clause prohibits any diminishment of the pension benefits promised to state workers, which makes reforming the system a challenge, Williams said. The pension protection clause has hampered past efforts to make changes to Illinois’ state-run pension systems.

“Without a constitutional change or a new interpretation by the Illinois Supreme Court, the only other option is a federal bailout,” he said. “The status quo will continue without a radical change in leadership.”

For states with large pension debts, such as Illinois and California, Williams said getting out of debt will take a long time. “The numbers are daunting, but it can be done,” he said

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B. Kes White
B. Kes White

Here is where it always gets confusing for me because all of these states have massive amount of assets of their CAFR (comprehensive annual financial report).
Is the CaFR right and these states just need to liquidate some assets or is it really totally fucked?
Ps – i know its really totally fucked either way

Anonymous
Anonymous

The only people that will be screwed are the tax payers. The free shit army of government tit suckers will be taken care of right up until the currency collapses. At that point, the hyperinflation will wipe out everyone. Got guns and ammo? Hungry people get pissy, even the bankrupt government tit suckers will need to be held off. No telling how soon it starts but a bankrupt nation can only print money for so long before prosperous nations that produce things stop taking the fake money in exchange for real things. WW3 is looking like our last option as we try to keep the $ alive. Try to get ready for this shit storm NOW, later it will be to late.

WillyB
WillyB

Last worldwide disaster like this? Let’s see. Oh yes, the Great Depression. WW2 “fixed” that one. The huge number of armed Americans kept the Japanese from invading the mainland. The Dems want to disarm us. Who’s the enemy here?

Speaking of pension problems, mine and my wife’s IRAs lost 18% since 12/31/21. We don’t need the RMDs, as we live a modest life, but we’ll have to sell investments–at a loss–in order to fund the Required Minimum Distributions and PAY TAX on them, even though we don’t need the cash to live on. I think I’ll buy a Desert Eagle handgun in .50AE, so I’ll have an “under 10 round” magazine pistol, just in case. If I can’t have 15 rounds in my 9mm Glock, I’ll have seven in my fifty caliber Desert Eagle!

bug

Ultimately, they will just sweep everyone’s retirement funds into one big “account” (except congress’s). They will say it is not ‘fair’ that the ‘fortunate few’ have retirements when those who relied on gov’t promises get screwed. So they will ‘manage’ (steal) everyone’s retirements so they can have the poweer and control of doling what is left out to those the politicians favor.

Yup. It will be sold by the media, and will look like they are ‘doing something.’

After all, rich people don’t have retirement accounts. Neither do welfare recipients or illegals. Only gov’t workers, unions, and the middle class have retirement accounts. And you can bet that the gov’t workers and unions will be happy to steal the private accounts of their fellow citizens if it seems like they’ll get their bennies.

Back in the early 2000’s San Diego struck a deal with their public unions to increase their benefits, if the unions would agree to not complain that the increase was not actually funded.

In Cali, payment of retirement benefits (to public unions) is ‘guaranteeed’ by the state constitution…

Glock-N-Load

Add pensioners to your TEOTWAWKI list.

Anonymous
Anonymous

Illinois makes it worse by giving some of the pensioners a 3% raise each year. I have looked up teachers from when I was in high school and their pensions are around 150K. They retired in 2000, so their pensions have more than doubled since they retired. They have made more in pension than teaching for 30+years.

Anonymous
Anonymous

Yup, my dad is one of them. He once said that over 30 years he had paid in 30k, but he has got back 1.5mill. He is not capable of understanding that this is not sustainable.

MMinWA
MMinWA

I’ve read lifeguards in CA can retire in their mid 40s with massive pensions, a few have worked the system to get over $400K! Then they can go into another gov job and get another pension.

That just can’t last.

WillyB
WillyB

That’s pretty common here in Texas. City inspectors in Houston retire after 20 years and start collecting a pension. Then they go to work as inspectors in neighboring small cities. Every single inspector when I got a water softener, a standby generator, and a swimming pool–a total of about 25 inspections when you count the re-inspections–were “retired” City of Houston people.

subwo
subwo

My BIL lives next door to the highest paid retiree in the state of California. Last year he got just under half a million.

Paleocon
Paleocon

If we can print $40 billion to bail out Ukraine’s pensioners, I’m sure we can print money for our pensioners.

Let. It. Burn.

Iska Waran
Iska Waran

It sure would be horrible if government workers didn’t get to retire in their 50’s and get generous pensions for life.

BL
BL

Iska- Bingo, I’m surrounded by state pensioners retired at 50 and do nothing but eat and watch Fox News. Not 55…..50…….FTS.

Toujours Pret
Toujours Pret

“They” are probably hoping that the shots take out a huge chunk of the 40+ crowd.

Iska Waran
Iska Waran

So am I.

Arizona Bay
Arizona Bay

It’s all good until EBT, SS, or pension deposits don’t come. Then it will be go time.

WillyB
WillyB

Right. Social Security is the biggest. The next fix for SS will be “means testing.” Those of us who benefited from Trump’s waiver of the IRA RMD’s for 2020 (we didn’t need the cash so we didn’t take the distribution) saved taxes for 2020, but we inadvertently also got on a list of people who must have “means” and therefore should not get Social Security, even though we paid two and three times as much into the system as the average recipient.

Anonymous
Anonymous

Illinois spends about 25% of its annual general fund budget on pensions, but has failed to make a significant dent in its overall pension burden. The state’s pension protection clause prohibits any diminishment of the pension benefits promised to state workers, which makes reforming the system a challenge, Williams said. The pension protection clause has hampered past efforts to make changes to Illinois’ state-run pension systems.

“The state’s pension protection clause prohibits any diminishment of the pension benefits promised to state workers”

What? The law says that people must receive the money they were contractually promised? And the nerve of those retired people expecting the contracts to be honoured.

You can bitch about the sweet deals that were given to these people, but pension is part of the compensation package. Changing the deal after the fact is fraud and theft.

Would you be OK with being told you would only receive half pay once you completed a contractual obligation because those who hired you were financially incompetent?

“The pension protection clause has hampered past efforts to make changes to Illinois’ state-run pension systems.”

Translation. The law is making it very hard to steal from the people we promised money to.

august
august

And Uncle Adolf promised the German people Lebensraum in the East. So sue him.

Anonymous
Anonymous

Oh my. So clever. So insightful.

Barbara
Barbara

Too bad. I agree with LET IT BURN!

Anonymous
Anonymous

You can bitch about the sweet deals that were given to these people, but pension is part of the compensation package. Changing the deal after the fact is fraud and theft.

Promises that can only be kept by stealing from some to give to others is also fraud and theft. Fraud and theft were built into the contract. So, I’ll keep bitching, thank you.

Same applies to welfare, Social Security, Medicare, etc. Ponzi frauds to redistribute wealth to buy political support — i.e., SOCIALISM. If you don’t care that it was always theft from its inception, then I don’t care when Socialist government promises to you get broken.

Here’s what the government will say to you:

NOT MY PROBLEM. It’s yours.

Anonymous
Anonymous

Welcome to the private sector pension plans that were bankrupted just before you could collect .
Equal treatment or equal protection !
If government pensions must be paid then steel workers that got screwed out of pensions by the Federal Guarantee Board time to pay up just raid the congressional pensions and investments cut expense accounts and government salaries and vacation plans oh and health care plans too

Anonymous
Anonymous

Wow to fucking bad guess you all will have to take that minimum wage job and work till you drop

WillyB
WillyB

Or get a gun and start robbing politicians.

Herc
Herc

Monkeypox/covid2.0/vax will fix this problem

Sasquatch62
Sasquatch62

I predict a whole lot of dead politicians when this shit hits the fan

Stucky

I predict a whole lot of suicides. Ruined people are much more likely to kill themselves than seeking out someone to blame and murder.

jose__lopez
jose__lopez

I think thecovid 19 PLANNED_DEMIC was designed to depopulate the planet including get rid of people who are supposed to get a pension, social security, 401ks
We know the money is not there, or there is not enough money to pay everybody what was promised.
And DEAD PEOPLE do not collect pensions, social security, 401ks etc.
This is a global issue with very few exeptions some countries.

card802
card802

My mother in laws second husband worked for Chicago government, he died, she got his Illinois pension.
Never worked or lived in Illinois, but Illinois taxpayers now pay her a pension while she lives in Michigan and Florida.

A buddy of mine worked for the county government, 30 years later he got to retire at 55. I asked him if the guy he replaced was still alive, yup. So…….the taxpayer pays the first guy’s pension and health care, we pay for my buddy’s pension and health care, and we pay the new guys salary and health care?

Multiply that millions of times across the country.

Sounds sustainable to me…..

Barbara
Barbara

Be patient. It all works out in the end. Wait for it…👵😇

WilliamtheResolute
WilliamtheResolute

Bend over because Social Security and State and Federal pensions will either be reduced, dissolved or paid in worthless fiat…it’s going to get spicy.

Leethal
Leethal

Why do you think they want you to take the mRNA jab? Especially you older people. But looks like it’s backfiring and killing the younge ‘uns.

ConservativeThought
ConservativeThought

“When investment returns fail to meet expectations, taxpayers and plan members must make up the difference through increased contributions.”

So when we reach the point that govt can’t keep increasing taxes to cover the pension gap, it’s going to be wake-up call for everyone that our govt will print us in hyper inflation vs NOT paying pensions

The day of reckoning is coming sooner than anyone in MSM wants to admit

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