A study released Wednesday from Pew Charitable Trust found 61 “key” cities across America have pension and healthcare funding gaps of a combined $217 billion.
These cities had a shortfall of $99 billion in fiscal year 2009, the most recent year with complete data, according to the report titled “A Widening Gap in Cities.” The rest of the shortfall—$118 billion—was for retiree health care and other benefits. Because some cities are slow to report their results, a complete set of data was available only through fiscal year 2009. Over the long term, cities and states strengthen their fiscal position if they have policies that aim to fully fund their pension and retiree health care obligations, Pew notes.
“Between 2007 and 2009, 16 cities consistently did well in funding their pensions, while nine cities underperformed. Wide disparities exist in how well prepared cities are to fulfill their pension obligations to employees.
It notes Milwaukee had a surplus at the end of fiscal year 2009, with enough money to cover 113% of its liabilities. At the other end of the spectrum, pension systems in four cities—Charleston, W.Va; Omaha, Neb.; Portland, Ore; and Providence, R.I.—were the most poorly funded, with Charleston trailing all the cities at 24%.
The report drew the ire of the National Conference on Public Employee Retirement Systems, the country’s largest trade association for public sector pension funds. Hank Kim, the organization’s executive director and counsel, called the report’s findings about the health of municipal pension plans “distorted and outdated.”
Kim specifically took aim at the age of the data Pew analyzed, noting it was four years old and included the period directly following the economic crisis.
"[It] may provide a valuable history lesson, but it cannot yield a realistic representation of the status of municipal pension plans today,” Kim said in a statement.
Pointing to the organization’s own report, “The 2012 NCPERS Fund Membership Study,” he said it found that local pension funds are continuing their strong recovery from the negative impacts caused by the Great Recession.
“Participating funds reported a solid average funded level of 74.9%—and it’s important to note that according to its February 2011 report Enhancing the Analysis of U.S. State and Local Government Pension Obligations, Fitch Ratings considers a funded ratio of 70% or above to be adequate. Those funds also reported strong and growing returns on their longer-term investments (three to 10 years), a very good sign for any organization that pays off its liabilities over an extended period of time.”