Public pensions struggle to make required contributions
An issue brief from the Center for State and Local
Government Excellence looks into the effects the 2008 to 2009 stock market
decline had on state and local pensions. The brief, “The Funding of State and
Local Pensions 2011 – 2015,” finds that a number of states and localities have
been having trouble paying their full annual required contributions (ARCs). In
2011, employer contributions equaled 79% of the required payments.
The brief reveals a wide variation in the funded status of
pension plans. While 36% of the 126 state and local plans in the sample have a
funded ratio of more than 80%, a majority have slipped below that level. A few
pension plans face serious problems that must be addressed; most are making
modest changes that are needed to stabilize employer costs and ensure that
pension promises can be kept.
In other key findings: During 2011, the funded status of
public plans slipped slightly, from 76% to 75%. This decline reflected slow
asset growth due to actuarial smoothing, which was partly mitigated by an
unexpected reduction in liability growth. Going forward, the funded ratio is
projected to remain steady next year and then gradually improve as the market
meltdown phases out of the calculations.
The brief was written by Alicia H. Munnell, Jean-Pierre
Aubry, Josh Hurwitz, Madeline Medenica and Laura Quinby of the Center for
Retirement Research at Boston College.