State Retirement Systems and Pensions

Shortfalls in state-run retirement systems continue to grow, and in the 2012 fiscal year, the gap between promises to state workers and funding in the accounts reached $915 billion. Unfunded pension obligations can have significant implications for a state’s fiscal stability, including lower credit ratings, increased borrowing costs and the diversion of state resources away from other spending priorities like infrastructure and education. 

Shortfalls in state-run retirement systems continue to grow, and in the 2012 fiscal year, the gap between promises to state workers and funding in the accounts reached $915 billion. Unfunded pension obligations can have significant implications for a state’s fiscal stability, including lower credit ratings, increased borrowing costs and the diversion of state resources away from other spending priorities like infrastructure and education. 

Shortfalls in state-run retirement systems continue to grow, and in the 2012 fiscal year, the gap between promises to state workers and funding in the accounts reached $915 billion. Unfunded pension obligations can have significant implications for a state’s fiscal stability, including lower credit ratings, increased borrowing costs and the diversion of state resources away from other spending priorities like infrastructure and education. 

Shortfalls in state-run retirement systems continue to grow, and in the 2012 fiscal year, the gap between promises to state workers and funding in the accounts reached $915 billion. Unfunded pension obligations can have significant implications for a state’s fiscal stability, including lower credit ratings, increased borrowing costs and the diversion of state resources away from other spending priorities like infrastructure and education. 

Shortfalls in state-run retirement systems continue to grow and in fiscal year 2012, the gap between promises to state workers and funding reached $915 billion. “Many states are facing rising costs to pay for pension obligations and unfunded liabilities for future pension costs that are squeezing other budget priorities,” said Adrian Moore, vice president of the Reason Foundation.

A coalition of retiree groups, unions and state workers won a temporary restraining order and preliminary injunction yesterday that will delay significant reforms to the Illinois public retirement system from taking effect on June 1. Lawyers for the coalition argued that the reforms, which were signed into law by Gov. Quinn in 2013 to help solve the state’s $100 billion pension shortfall, are unconstitutional. A status hearing for the case is scheduled for May 22.

Yesterday Illinois Gov. Pat Quinn signed legislation that will make historic changes to the state's public employee pension program, which faces a $100 billion funding shortfall and has caused multiple downgrades to the state's credit rating.The law is designed to save the state $160 billion over the next thirty years and guarantees Illinois will make its full annual contribution to the pension funds. Legislative leaders have estimated the plan will reduce the current unfunded liability by about $21 billion and fully fund the retirement systems by 2044.

Moody’s Investor Service report, released on June 27, 2013, presented adjusted pension data for all 50 states in fiscal year 2011. Ten states had pension liabilities equal to or greater than their annual governmental revenues.  Of all the states, Illinois had both the largest Adjusted Net Pension Liability (ANPL), $133 billion, and the highest ANPL as a percentage of revenues, 241%.

California enacted sweeping public pension reforms in 2012. Despite competing claims that extensive reform either wasn’t warranted or didn’t go far enough, California’s pension legislation will provide immediate savings and reduce unfunded liabilities over the long term.1
 
Citizens and governing bodies are demanding more transparency regarding a government's overall financial condition and individual transactions than ever before. The movement toward more transparency began just before the economic downturn that emerged in 2008, but really gathered steam with the passage of the American Recovery and Reinvestment Act in 2009, which required quarterly reporting on a national website of Recovery Act-related expenditures. States and many local governments followed by creating their own transparency websites. In 2012, the Governmental Accounting Standards Board, known as GASB, issued two new accounting principles that are designed to provide increased transparency into one of government’s largest unfunded liabilities—pension systems. GASB, through the issuance of Statement No. 67 for pension plans and Statement No. 68 for employers, has dramatically changed the way pensions are calculated and reported in a government’s financial statement. This article will highlight the changes relating to Statement No. 68, focusing on how the new standard will assist state and local policymakers and the public to better understand their pension liabilities.
 

Pages