The Widening Gap
The Great Recession's Impact on State Pension and Retiree Health Care Costs
- States' Fiscal Health
- State Health Care Spending
- Contact Brian Keegan 202.540.6677
- April 25, 2011
Estimating the States' Pension Gap: 5.22 Percent Rate of Return
States make assumptions about investment rates of return when they calculate how much money to set aside to pay for their employees’ pension benefits. The table below illustrates the impact of a 5.22% rate of return.
Defined-benefit pension plans in the private sector use the interest rate for a high-end corporate bond, 5.22 percent as of March 2011.
Private sector plans are required to use rules set by the Financial Accounting Standards Board (FASB), basing the return assumptions on the rate on high-quality corporate bonds. Based on the FASB rate, no state is more than 80 percent funded and only four—North Carolina, Wisconsin, New York and Washington—are more than 70 percent funded. Illinois and New Hampshire would both have state-run pension systems that were less than 40% funded and the total funding gap would be over $1.8 trillion.
| Alabama | $58,530,840 | $27,767,742 | 53% | 74% | $16,896,286 |
| Alaska | $22,131,646 | $12,756,145 | 42% | 61% | $6,783,878 |
| Arizona | $62,694,027 | $28,484,456 | 55% | 78% | $18,615,633 |
| Arkansas | $31,897,298 | $14,300,145 | 55% | 78% | $9,198,392 |
| California | $676,639,597 | $280,738,010 | 59% | 81% | $186,050,479 |
| Colorado | $76,668,769 | $39,069,781 | 49% | 69% | $22,132,220 |
| Connecticut | $61,147,253 | $35,694,353 | 42% | 62% | $19,835,853 |
| Delaware | $10,705,580 | $3,519,930 | 67% | 94% | $3,090,414 |
| Florida | $193,653,002 | $74,613,171 | 61% | 84% | $52,167,722 |
| Georgia | $106,397,981 | $36,842,044 | 65% | 87% | $26,499,571 |
| Hawaii | $23,265,072 | $11,884,111 | 49% | 69% | $6,716,003 |
| Idaho | $16,503,279 | $7,572,379 | 54% | 74% | $4,445,779 |
| Illinois | $187,010,755 | $123,014,336 | 34% | 51% | $60,575,245 |
| Indiana | $48,498,131 | $23,937,000 | 51% | 67% | $11,573,286 |
| Iowa | $35,457,764 | $13,940,478 | 61% | 81% | $8,855,248 |
| Kansas | $29,716,589 | $16,255,368 | 45% | 64% | $8,578,383 |
| Kentucky | $47,960,556 | $27,192,773 | 43% | 58% | $12,273,819 |
| Louisiana | $56,910,217 | $33,103,569 | 42% | 60% | $17,252,293 |
| Maine | $19,723,181 | $9,256,281 | 53% | 73% | $5,313,181 |
| Maryland | $72,604,060 | $38,183,545 | 47% | 65% | $19,549,495 |
| Massachusetts | $88,224,000 | $46,853,548 | 47% | 68% | $27,083,664 |
| Michigan | $102,475,904 | $44,966,404 | 56% | 79% | $29,564,004 |
| Minnesota | $90,045,717 | $43,166,149 | 52% | 77% | $29,210,366 |
| Mississippi | $44,124,230 | $23,029,762 | 48% | 67% | $12,737,483 |
| Missouri | $78,611,989 | $34,721,396 | 56% | 79% | $23,296,993 |
| Montana | $14,278,534 | $6,646,554 | 53% | 74% | $4,007,507 |
| Nebraska | $13,219,407 | $4,959,010 | 62% | 88% | $3,792,037 |
| Nevada | $46,600,729 | $22,584,836 | 52% | 72% | $13,452,382 |
| New Hampshire | $12,621,624 | $7,633,704 | 40% | 58% | $4,091,631 |
| New Jersey | $194,683,091 | $105,563,560 | 46% | 66% | $59,754,866 |
| New Mexico | $40,773,611 | $18,686,640 | 54% | 76% | $11,770,249 |
| New York | $206,280,718 | $57,419,718 | 72% | 101% | $59,547,718 |
| North Carolina | $99,656,318 | $25,209,206 | 75% | 97% | $22,679,776 |
| North Dakota | $6,286,913 | $2,644,813 | 58% | 81% | $1,811,113 |
| Ohio | $240,669,091 | $127,612,143 | 47% | 66% | $69,474,720 |
| Oklahoma | $47,840,545 | $27,858,182 | 42% | 57% | $13,025,301 |
| Oregon | $79,865,684 | $31,136,484 | 61% | 86% | $23,055,084 |
| Pennsylvania | $156,493,052 | $66,506,452 | 58% | 81% | $45,175,352 |
| Rhode Island | $16,594,831 | $9,842,747 | 41% | 59% | $5,094,406 |
| South Carolina | $59,115,869 | $30,244,299 | 49% | 69% | $17,065,168 |
| South Dakota | $10,260,383 | $3,386,035 | 67% | 92% | $2,765,488 |
| Tennessee | $46,872,960 | $15,233,306 | 68% | 90% | $11,674,219 |
| Texas | $218,857,503 | $87,874,241 | 60% | 84% | $63,178,299 |
| Utah | $33,258,652 | $12,440,222 | 63% | 86% | $8,959,469 |
| Vermont | $5,776,962 | $2,853,838 | 51% | 73% | $1,764,007 |
| Virginia | $92,064,716 | $36,941,716 | 60% | 80% | $22,929,716 |
| Washington | $81,168,797 | $24,006,697 | 70% | 99% | $23,414,097 |
| West Virginia | $18,998,102 | $11,021,072 | 42% | 56% | $4,731,683 |
| Wisconsin | $108,858,400 | $29,947,100 | 72% | 100% | $29,753,800 |
| Wyoming | $10,405,364 | $3,834,204 | 63% | 89% | $3,003,750 |
| Source: Pew Center on the States, 2011 | |||||
Report Assets
Expert
Kil Huh is director of the States’ Fiscal Health Project.
Video
Watch Sue Urahn, managing director for the Pew Center on the States, discuss the scope of the pension and retiree health benefit problem.
- Date:
- April 25, 2011
- Contacts:
- Brian Keegan | 202.540.6677
- Project:
- States' Fiscal Health , State Health Care Spending
- Issues:
- Pensions, Retiree Health Care, Retiree Health Care Costs
- State:
- National
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