State Retirement System Funding Down Sharply in 2008

Among these 59 plans, pension assets declined by -7.6%, or -$65.9 billion, from $869.4 billion in 2007 to $803.6 billion in 2008, while liabilities grew 5.9%, or $57.6 billion, from $982.9 billion to $1.04 trillion. This led to a significant increase in the aggregate shortfall, as the -$113.5 billion shortfall in 2007 widened to a -$237.0 billion shortfall in 2008, the report said.

Of the 59 state retirement systems that reported actuarial data for 2008, 93% are underfunded, and the average underfunded plan has a ratio of assets-to-liabilities equal to 73%. By comparison, of 117 state retirement systems that reported actuarial data for 2007, 66% were underfunded, and the average underfunded plan had a ratio of assets-to-liabilities equal to 82%.

Among all 125 state retirement systems included in Wilshire’s study (66 of which were late-reporting for 2008), they have, on average, a 68.4% allocation to equities – including real estate and private equity – and a 31.6% allocation to fixed income.

The report indicates asset allocation varies widely by retirement system. Thirty-one of the 125 retirement systems have allocations to equity that equal or exceed 75%, and one system has an equity allocation below 50%.