Unfunded liabilities of state public pension plans now tops $6 trillion, an increase of $433 billion from the previous year, according to a report from the American Legislative Exchange Council.
"Unfunded liabilities of public pension plans continue to loom over state governments nationwide," the report states. "Absent significant reforms, unfunded liabilities of state-administered pension plans will continue to grow and threaten the financial security of state retirees and taxpayers alike."
Taxpayers are impacted by this pension crisis since they are the ones funding the wages of government employees. The report notes, however, that all residents are impacted because the funds that go to pensions take away resources from government services such as public safety, education, and roads.
The report finds that state pension liabilities average about $18,676 for every American in the United States. In some states, the liabilities average is much higher. For example, in Alaska, each resident is responsible for $45,689 in pension liability—the highest cost in the nation.
Along with Alaska, the states of Illinois, Connecticut, New Mexico, and Ohio rank as the worst in the nation for unfunded pension liabilities per person. When looking at unfunded liabilities as a whole, the states of California, New York, Illinois, Ohio, and Texas rank as the worst five states in the nation.
Some states, such as Utah, Arizona, Alaska, Oklahoma, Pennsylvania, and Michigan have made attempts to solve their liability crisis by implementing reforms. For example, Arizona governor Doug Ducey implemented reforms focusing on cost-of-living adjustments. The reform is expected to save taxpayers $1.5 billion over the next three decades. Pennsylvania also made reforms such as creating a defined-contribution component for every school district and state employee, giving employees more retirement options such as a 401(k) style plan.
"Absent fundamental reform, broken pension systems threaten the financial sustainability of state budgets and the financial future of public servants," said Jonathan Williams, chief economist at ALEC. "Taxpayers, workers, and retirees will all share in the burden unless policymakers make significant changes."
The report says that lawmakers and officials should be held responsible, and one way to do this is by ensuring that all financial information be made transparent to the public online in an accessible format.
"Transparency enables voters, taxpayers and all stakeholders to access, research and understand the operations of the government and hold lawmakers and officials accountable for their actions," the report states. "For more than a decade, ALEC has called on state and local governments to put their budgets online, in an accessible format for all taxpayers to see."
Published under: Pension