Report

The Widening Gap Update

States are $1.38 Trillion Short in Funding Retirement Systems

Quick Summary

The gap between the promises states have made for public employees’ retirement benefits and the money they have set aside to pay these bills was at least $1.38 trillion in fiscal year 2010, according to Pew's latest comprehensive analysis on pension and retiree health care funding.

 

View individual state fact sheets in the drop-down menu below.

States continue to lose ground in their efforts to cover the long-term costs of their employees’ pensions and retiree health care. In fiscal year 2010, states were $1.38 trillion short of having saved enough to pay their retirement bills, a nine percent increase from the year before.

Over the last three years, the majority of states put reforms in place to better manage their retirement bills, but there is more work to be done to get back on solid fiscal footing.

how the states measured up in retiree benefits funding[x]
 

How Did The States Fare?

Pew rated 11 states as solid performers in managing their pension obligations in fiscal year 2010. These states were at least 90 percent funded. Seven states earned a 'needs improvement' rating and 32 states were cause for 'serious concerns.'

On retiree health care and other benefits, Pew rated 10 states as solid performers. 16 states earned a 'needs improvement' rating, and 22 states had cause for 'serious concern.'
View our report
 How Did the States Fare?SOURCE: Pew Center on the States 2012
 
 

Key Findings

Pensions

Pension plans represent more than half of the retiree benefit funding shortfall. Experts say that a healthy pension system should be at least 80 percent funded.

  • In 2010, only Wisconsin had fully funded its pension plan and 34 states were below the 80 percent threshold.

  • Connecticut, Illinois, Kentucky, and Rhode Island were the worst among the states, with pensions funded under 55 percent in 2010.

  • North Carolina, South Dakota, Washington, and Wisconsin were the best among the states, with pensions funded at 95 percent or better in 2010. 

  • Keeping up with the annual required contribution is perhaps the most effective way that states can responsibly manage their long-term liabilities for public sector retirement benefits. Pew's research shows that states that consistently make their full payments have better funded retirement systems and smaller gaps.

Retiree Health Care

States only have 5 percent of the funds needed to pay for their retirees’ health care and other non-pension benefits—such as life insurance.

  •  17 states did not set aside any money to fund their retiree health care liabilities. 
      
  •  Only seven states had funded at least 25 percent of health care liabilities— Alaska, Arizona, North Dakota, Ohio, Oregon, Virginia, and Wisconsin.
      
  •  Alaska and Arizona are the best among states, with nearly 50 percent of their health care liabilities funded

 

Report Assets

widening_gap_interactive_feature Data Visualizations
Interactive: The Widening Gap

This interactive presents data on states' funding of pensions and retiree health care as of fiscal year 2010.

pensions image Featured Collection
Pension and Retiree Health Benefits

Pension and retiree health care costs are rising sharply in the states. Learn more about Pew's work on retiree health benefits.

State Fact Sheets
Date:
June 18, 2012
Contacts:
Brian Keegan | 202.540.6677
Project:
Public Sector Retirement Systems
Issues:
Revenue and Spending, Pensions, Retiree Health Care
State:
National

Related RESEARCH & ANALYSIS

PCS.PRODUCTION.1.20140421.1115 (PEWSUWVMWAPP01)