Lawmakers didn't budget for pensions, even in good times
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When it comes to saving for retirement, Americans are pretty good at pushing the ball down the road. So it should come as no surprise that those they elect to protect their interests at the local, state and federal level are equally adept at postponing the day of reckoning.
This ability was documented last week in a report from the Pew Center on the States, a division of the Pew Charitable Trusts that would have a lot more time on its hands if state governments behaved more responsibly.
The center compared pension and health benefits that states have promised their employees and retirees to the amount of cash on hand to pay for those benefits and discovered a $1 trillion shortfall: $3.35 trillion in promises and $2.25 trillion to pay them.
"Many states shortchanged their pension plans in both good times and bad, and only a handful have set aside any meaningful funding for retiree health care and other nonpension benefits," Sarah Urahn, the center's managing director, wrote in the report.
The funding gap, she noted, may actually be larger because it is based on fiscal 2008 figures. Many states have fiscal years that end June 30, so the snapshot does not fully reflect the stock market's collapse in fall 2008. (Nor does it reflect the recovery that began in March.)
According to the report, the shortfall developed for a number of reasons: states failed to fund benefits at levels their own actuaries recommended; they increased benefits without appreciating the extra cost; and they provided health care benefits without setting up proper systems for funding them.
Pennsylvania was among 15 states the center said needed to improve retiree benefit funding discipline. Sixteen other states, including Ohio, were rated solid performers. Pew had "serious concerns" about the remaining 19 states, including West Virginia.
First Published February 21, 2010 12:00 am
