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Unfunded Liabilities From State Government Pension a Major Threat, Report Finds

December 18, 2017 - 6:00am

The American Legislative Exchange Council (ALEC), the nation’s largest organization of state legislators, recently published a report on the growing problems state pension plans are causing.

ALEC‘s “Unaccountable and Unaffordable” report focuses on more than 280 state administered public pension plans and details their assets, liabilities and unfunded liabilities. The report highlights how unfunded liabilities of state employee pension plans currently stands at more than $6 trillion, a figure which continues to grow. Over the past year, those unfunded liabilities grew $433 billion. The report shows the national average funding ratio stands at 33.7 percent, amounting to $18,676 dollars of unfunded liabilities for every American.

The report notes several factors contributing to this growing problem including government officials relying on faulty math and economic calculations to determine the unfunded liabilities. The report also finds that many states use flawed methodology which some state governments refuse to acknowledge. 

Jonathan Williams, chief economist for ALEC and one of the authors of the report, told Sunshine State News there are several contributing factors which are  causing problems for states and their pensions systems, including state governments failing to make their annually required contributions to their own pension plans (ARC). Williams said when a state skips a current payment, it still has to be made down the road and noted that some state officials “showcase” unrealized investment returns. 

“When politicians posture about government pensions, yet the returns don’t come in as promised and the money isn’t there to make up the difference, it isn’t only current state workers and retirees that are affected by this unfunded pension crisis,” Williams said. “It’s also the taxpayers.”

ALEC is not alone is sounding the alarm on this issue as several other groups have also pointed to the growing problem. The National Association of State Retirement Administrators (NASRA) has noted the vast majority of states consistently fail to make full ARC payments with some states skipping payments altogether. According to a 2017 Pew Charitable Trusts report, only 32 states in the 2015 fiscal year made pension fund contributions sufficient enough to diminish accrued unfunded liabilities.

ALEC’s report also touched on Florida’s pension system which is facing a few problems. The Sunshine State slipped from 43rd last year to 44th in the most current rankings when it comes to overall unfunded pension liabilities. During that year, the raw unfunded pension liabilities grew from $210,153,896,482 to $226,527,273,092 – a $16 billion increase.  Per capita unfunded liabilities also grew worse in the past year, rising from $10,381 to $10,990 while the pension funding ratio fell from 40.5 percent to 39.1 percent.  

However, there was some good news in the report as Florida ranks eleventh on funded ratio and sixth when it comes to unfunded liabilities per capita.

Williams said that when taxpayers have to pay the bill for government employees, state and local governments are often strained to pay for the promised benefits included in traditional pension plans.

“All residents are impacted when pension costs absorb limited government resources that would normally go to fund core government services such as education, public safety, and roads,” Williams told Sunshine State News. 

ALEC noted that some states, including Arizona, Pennsylvania and Michigan, have moved to 401(k)s instead of pensions for state workers, an idea that Republicans in Tallahassee have kicked around a few times in recent years. 

However, Williams and the other authors of the report continued to warn about what will happen if elected officials don’t tackle the issue as unfunded liabilities continue to grow and threaten the financial security of retired government workers and taxpayers alike, saying that could be far worse and longer than the Great Recession.


Ed Dean, a senior editor with SSN whose talk show can be heard on radio stations across Florida, can be reached at him on Twitter: @eddeanradio


Pensions are always a bad idea. They get ever larger and take all the responsibility of savings for retirement out of peoples hands. Never a good idea. People must learn and educate themselves about life and living it on their own and not as a "child" that has to be taken care of.

Who ever said that you should work 20 years and then sit on your ass for the next 30? What happened to you work as long as you can and then live on what you saved? While not gospel I have to think Chicago the most screwed up place in the country if you don't count the state of CA. Average schoolteacher salary over 100K. After 20 they get 80% plus health care for life. This, of course, is not reality but Chicago has not dealt with reality since their main bidness was stockyards

ALEC is a joke. They are alarmists who detest pension benefits for public employees. Their numbers are a fiction, and Sunshine State News should not report them so uncritically.

Already a few comments about first responders. I work with several and many don't mind contributing their own % to retirement. But the vast majority of state employed first responders have current salaries between $30k-$50k. Other FRS entities (counties, etc.) are usually much higher. Because of the lower salaries, they end up working for several years past the normal 20 years, and still work for 25 or 30+ years. IF they are NOT in DROP, it ends up pushing up the retirement benefit percentage. Even the 2014 DMS report proved Florida operates with less state employees per capita than nearly every other state - they already do more with less than the rest of the country. Florida has less fat to trim than people think like to think.

Just one more example of the opprobrious nature of our incompetent and shameful "political elitist class"! ! ! (Start by "flushing out" Liberal Democrats',.... and THEN, let's see what's left and what we need to do...). [Should only take a few "election cycles" (and/or a number of prosecutions and indictments: NO quarter, and NO mercy ! )

either fund them correctly or move on to something else. Its just that simple, but that's a tough one to figure out for most politicians...

Politicians sucking up to citizens and first responders create our fiscal problems. Government CAN'T do all that citizens want. It wasn't designed to do so and shouldn't be expected to do so. Additionally, the politicians have created a monster with first responders. Their unions will take advantage of every inch and the citizens believe the publicity.

Either public employees are being paid too much or the pondscum sucking politicians are using the money for something else. Payments to keep sex scandals quiet probably. Wonder how Chicago ranks? Baltimore? St. Louis? Los Angeles? Denver? Detroit? Atlanta? More or less, anywhere controlled by Democrats for the past 50 years. I can guess, anyone care to take a look and report back. On a hunch, I vote Chicago #1.

There is only one word to describe our politician's utter failure to exert fiscal control over pension obligations - MALFEASANCE. Ultimately, who do you think will pay asked to cover this shortfall? Yes it the taxpayers. Worst of all, by underfunding these plans, the unrealized effect of the Trump Bump in stock market performance was 'lost'. God forbid when the market correction of 20% materializes. If you thing our finanacial picture is weak now, wait until then.

Laughable, that everything is Trumps fault! When these u funded liabilities have been going on for decades

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