State Pension Funds $1 Trillion Short -- or, Is It $3 Trillion?

February 19, 2010 (LPAC)—According to a new report from the Pew Center on States, states promised current and retired workers a total of $3.25 trillion in benefits through June 30, 2008, but state governments had contributed only $2.35 trillion to their benefit plans. In eight states—Connecticut, Illinois, Kansas, Kentucky, Massachusetts, Oklahoma, Rhode Island, and West Virginia—more than one-third of the total pension liability was unfunded. Two additional states—Illinois and Kansas—had less than 60 percent of the necessary assets on hand. Illinois has the largest pension-funding gap, with only 54% of the necessary contributions made to pay promised benefits to current and future retirees. Only four states—Florida, New York, Washington and Wisconsin—had fully funded pensions systems.

But as of the end of 2009, the shortfall is at least three trillion dollars. Orin Kramer, chairman of New Jersey's investment council, told the FT that he puts the shortfall for the US public pension system at more than $2 trillion by the end of 2009, with another $1 trillion for healthcare.

Insanely, the Pew Center proposes to address this crisis by lowering benefit levels and increasing the retirement age for new employees.