Report

The Widening Gap

The Great Recession's Impact on State Pension and Retiree Health Care Costs

 

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

PEW_Huh_230x130_km_OWN Expert
Pew Expert: Kil Huh

Kil Huh is director of the States’ Fiscal Health Project. 

PEW_Urahn_230x130_km_OWN Video
State Pension Costs

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:
Public Sector Retirement Systems
Issues:
Pensions, Retiree Health Care, Retiree Health Care Costs
State:
National

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PCS.PRODUCTION.1.20140221.1210 (PEWSUWVMWAPP02)