The gap between state obligations for employee retirement benefits and the money set aside to pay for them grew to at least $1.26 trillion in fiscal 2009 — a 26% increase in one year, according to this Pew Center for the States analysis. Pension plans accounted for $660 billion of the gap, health care and other benefits for another $604 billion. The states collectively contributed only $73 billion in 2009 toward their plans, far short of the $115 billion urged by actuaries.
And that may be a conservative projection. The Pew estimate is based on the states’ own actuarial assumptions. Most states assume that their funds will earn a compounded rate of 8% annually in future years but many observers believe that figure is too optimistic.
The Government Accountability Office advises states to reach at least an 80% funding level. By that measure, Virginia’s funding of its public employee pensions is barely adequate, at 80% on the nose. The state’s unfunded liability amounts to $13.8 billion. By purposes of comparison, the General Fund budget this year is about $15.5 billion.
By Pew’s count, 31 states are doing worse — but 18 states are doing better. (Click on map for more legible image.) Not exactly consistent with our AAA bond rating, is it?