States’ Future Pension, Health Care Liability for Employees Totals $2.73T, Some Is Unfunded, According to Analysis

Nearly half of states have not adequately funded their pension and retiree health care obligations, which will total $2.7 trillion over the next 30 years, according to a study released on Wednesday by the Pew Center on the States, part of the Pew Charitable Trusts, the New York Times reports (Williams Walsh, New York Times, 12/19). States have reserved sufficient funds to cover 85% of the future pension and retiree health care obligations, according to the report.

The report found that states will owe $381 billion for retiree health care and other nonpension obligations over the next 30 years. In addition, the report found that the five largest states by population -- California, Texas, New York, Florida and Illinois -- have reserved no funds for retiree health care obligations (Elder, Austin American-Statesman, 12/19).

According to the Times, although "some states, including Alabama, Arkansas and North Carolina, have been diligently prepaying their retirement obligations," about half of states have "consistently let their contributions lag behind the amounts needed." In addition, the report found that some states had fully funded their pension and retiree health care obligations in the past, "only to run into trouble in the last few years," according to the Times.

The report said, "Large underfunded long-term liabilities put future budgets -- and taxpayers -- at risk," and efforts by states to fully fund their pension and retiree health care obligations each year require a "great deal of political fortitude and the kind of long-term thinking that is hard to come by, particularly in difficult economic times" (New York Times, 12/19).

Susan Urahn, managing director of the center, said, "States' fiscal health and economic vitality depends greatly on their ability to wisely manage these bills coming due" (Austin American-Statesman, 12/19). Urahn added, "For states that have dug themselves into a deep hole, there are no quick and easy solutions," although "there are fiscally responsible steps all the states can take" (Downey, Washington Post, 12/19).

The report is available online (.pdf).