State public pension funding levels dipped in 2011: report

Reuters News
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Posted: Sep 11, 2012 6:07 PM

(Reuters) - Only a third of U.S. state-level pension plans examined in a recent survey were funded at levels considered adequate, a report showed on Tuesday.

A survey by Loop Capital Markets found only 58 of 149 state-level public pension plans it reviewed were funded at 80 percent or more, a level that is considered healthy.

The median funded ratio for U.S. states' pension plans dropped to 73 percent in fiscal 2011 from 76 percent the previous year, Loop said.

The U.S. municipal bond market has been trying to understand the severity of the nation's public pension problem. Years of underfunding and more recent poor financial performance during the recession left some systems in varying degrees of trouble.

Central Falls, Rhode Island, for example, went bankrupt last year in part because the tiny city had nearly $80 million in unfunded local pension and retiree healthcare liabilities on revenues of just over $16 million.

There are thousands of public pension plans in the country at the local and state level.

Wilshire Associates reported on Monday that the large U.S. local public pension funds it surveyed were, on average, 80 percent funded as of June 30, 2011, up from an average of 72 percent the previous year.

Loop Capital has conducted its survey for 10 years. It found that states paid a median of 89 percent of their annual required contribution to their pension funds in fiscal 2011, down just 1 percent from the previous year.

"While we regard the situation as bad, we do not regard it as catastrophic," said Chris Mier, managing director of Loop Capital's analytical services.

The report found that some problems tend to be linked to specific states rather than the country as a whole.

New Jersey, for example, made just 2 percent of its annual contribution in 2011 on a weighted average basis. But it also enacted reforms that are expected to save $120 billion through 2040, with at least half the savings stemming from the suspension of cost-of-living increases.

(Reporting by Hilary Russ; Editing by Dan Grebler)