Pension funding 2009-2013

A recent paper from the Center for Retirement Research at Boston College reports on funding levels for state and local pension plans for FY2009, the first year that reflects the financial crisis, and projections for 2010-2013.

The report covers: (1) the evolution of public sector funding, which from the early 1980s made significant progress until the 2008 market collapse; (2) 2009 status of plans; and (3) projections for 2010-2013 under three different scenarios for the stock market (Dow Jones Wilshire 5000 Index).

An appendix of 109 state and 17 local plans provides ratios of assets to liabilities for 2001-2008 and estimates for 2009. The aggregate funding ratio declined from 91.4 in 2001 to 84.3 in 2008 and 78.5 in 2009. Hawaii went from 90.6 (2001) to 68.8 (2008) to an estimated 62.9 (2009).

From the Conclusion:

The key question is what should be done. A major increase in contributions is not realistic at this time....if funding levels are to be restored quickly, the money must come primarily from tax revenues. But the recession has decimated tax revenues and increased the demand for state and local services. Thus, finding additional taxes to make up for market losses will be extremely difficult. One small step that would be viewed as a commitment to responsible funding would be for states and localities to at least pay their full ARC [annual required contribution]. Otherwise, the only option is to wait for the market and the economy to recover.

The Funding of State and Local Pensions: 2009-2013, April 2010
      Report (pdf, 18pp/268kB)
      Introduction