According to the Stanford Institute for Economic Policy, the unfunded pension liability of all 50 states plus the District of Columbia rose 84% from 2008 to 2014 from $2.625 trillion to $4.833 trillion from 2008 to 2014 using a 2.18% market rate based on Treasury bonds. Though the actuarial rate using a higher rate of return of 7.5% shows a better picture at only $1.040 trillion of debt in 2014, the situation is still difficult which is why many states have frozen their pension plans.
State defined benefit plan assets were $5.1 trillion at the end of 2015 according to the ICI increasing just 11% since 2007 compared to $6.7 trillion in defined contribution plans like 401ks which rose 52% over that same period and $7.3 trillion in IRAs which rose 55%. Meanwhile, private DB were just $2.9% mirroring the State DB increase.
The difference is that the private sector has moved aggressively into participant directed DC plans where the employees bear the brunt of unfunded liability whereas the states have only recently started that transition. Some municipalities, most notably Detroit, have sought to shed their pension liability in federal bankruptcy court. Others face the difficult reality of either raising taxes or reducing pension benefits like Chicago is pursuing. In either case, services will suffer.
Illinois leads all stands in market rate funded liability at 23.3% compared to 41.4% for other states and DC. The list of states with the highest pension debt per household based on the more conservative market rate includes:
- Alaska$113,137
- llinois$77,822
- California$77,700
- Connecticut$72,862
- Hawaii$61,156
- Massachusetts$60,652
- New Jersey$58,409
- New Mexico$52,302
- Nevada$50,888
- Oregon$45,840
The site relies on actuarial, budgetary, demographic, and other financial data from a number of sources, notably Comprehensive Annual Financial Reports (CAFRs) provided by state pension systems. Population and household data are from the U.S. Bureau of the Census, and U.S. Treasury yields are from the U.S. Department of the Treasury. State expenditures and revenue were retrieved from the National Association of State Budget Officers (NASBO).
