The news of late regarding state and local pension plans has been a tale of woe. Many jurisdictions are under a mountain of debt and struggling to fund their fiscal obligations to retired state employees.
New research from Morningstar indicates just how widespread the problem is at the state level. In a report, “The State of State Pension Plans 2013,” Morningstar indicates that 26 states are failing to adequately fund their pension liabilities.
“While some states are adequately managing their pension liabilities, the majority of state pension systems are coming under duress,” the report states. “The fiscal solvency and management of these plans varies greatly…”
In aggregate, state pension plans are 72.6 percent funded with an unfunded actuarial accrued liability (UAAL) per capita of about $2,600, the report indicates.
Six states have funding levels of more than 90 percent, while seven have UAALs of less than $100 per capita. A dozen states have funded ratios (calculated by dividing pension plan assets by their liabilities) of at least 80 percent, which Morningstar views as “strong.”