Moody’s Has State Unfunded Pension Liabilities at $1.6 Trillion

In a research report released today Moody’s Investors Service says that unfunded US state pension liabilities surged in fiscal 2017 due to poor investment returns.

You need to be a subscriber to see the full report but here are highlights from their press release – and yes New Jersey ranked at the bottom of a category.

“Fiscal 2017 reporting shows total state ANPL at $1.6 trillion, or 147.4% of state revenue, up significantly from $1.3 trillion and 122%, respectively, in fiscal 2016,” said Moody’s Analyst Pisei Chea. “As a result, state ANPLs grew to 8.4% of US GDP in fiscal 2017 from 7.0% in fiscal 2016 as the unfunded liabilities grew by 25.5%.”

Illinois (Baa3 stable) had a 25% growth in ANPL and saw its adjusted net pension liabilities reach $250 billion, or 601% of state revenues (in 2017, before the state’s 2018 tax increase), an all-time high for any state. The median ANPL for FY 2017 was $12 billion, or 106.8% of revenues.

Many states were also not making sufficient pension contributions to prevent ANPL from growing, which Moody’s calls a “tread water” contribution level. The median pension contribution as a percent of the tread water indicator for all states was 95.5%, with 22 states over the 100% threshold, and New Jersey (A3 stable) displaying the weakest contribution ratio at 29.6%.

Healthy revenue growth will also help states service their pension costs. However, rising costs will continue to weigh on many states, including Illinois and Connecticut (A1 stable), where fiscal 2017 fixed costs for debt service, retiree health, and pensions on a tread water basis exceeded 30% of own-source revenue. Weak demographics in some states, such as West Virginia (Aa2 stable) and Maine (Aa2 stable), will present challenges for funding pension liabilities.

This year also saw some notable pension reforms in Ohio (Aa1 stable), Colorado (Aa1 stable), Minnesota (Aa1 stable), and Kentucky (Aa3 stable). This will help these states reduce future pension liabilities.

25 responses to this post.

  1. Posted by Tough Love on August 27, 2018 at 11:42 pm

    I sure hope it the workers (who have been the financial beneficiaries of this THEFT) who get socked ………….. rather than Taxpayers who have done nothing but been hoodwinked by their self-interested, contribution-soliciting, vote-selling Elected Officials.

    Reply

  2. Earth to Tough Love:

    In reality, it will be a little of both.

    “It seems like there’s enough blame to point to everyone,” Mitchell said.

    Moderation in all things.

    Reply

    • Posted by Tough Love on August 28, 2018 at 6:43 am

      About 4 days since we’ve heard from you and your alter-ego Stephen Douglas. Was thinking that perhaps your brain started to function properly ………… oh well.

      Reply

      • Was thinking that perhaps your brain started to function properly ………… oh well.
        Wishful thinking indeed 🙂

        Reply

      • Posted by Earth on August 28, 2018 at 3:44 pm

        Earth to whom it may concern:

        Strange but true.

        I used to ignore about half your BS. Now I ignore three quarters. Saves me a lot of time. I doubt that I’m the only one.

        “23 percent” is ten (very volatile) years out of date and was highly questionable even when new.

        “ROUTINELY 4 to 6 times greater in value upon retirement” has always been a logical fallacy.

        Ignoratio elenchi: True, but irrelevant. (Or tru-ish.)

        Stop me if you’ve heard this before… It is invalid to compare pensions outside the context of total compensation.

        Don’t be invalid.

        Reply

        • Posted by Tough Love on August 28, 2018 at 6:37 pm

          Andrew Biggs determined the 23% Public Sector Total Public Sector Compensation Advantage in CA and NJ.

          So, should we believe him with THIS bio”

          “Andrew G. Biggs is a resident scholar at the American Enterprise Institute (AEI), where he studies Social Security reform, state and local government pensions, and public sector pay and benefits. Before joining AEI, Biggs was the principal deputy commissioner of the Social Security Administration (SSA), where he oversaw SSA’s policy research efforts. In 2005, as an associate director of the White House National Economic Council, he worked on Social Security reform. In 2001, he joined the staff of the President’s Commission to Strengthen Social Security. Biggs has been interviewed on radio and television as an expert on retirement issues and on public vs. private sector compensation. He has published widely in academic publications as well as in daily newspapers such as The New York Times, The Wall Street Journal, and The Washington Post. He has also testified before Congress on numerous occasions. In 2013, the Society of Actuaries appointed Biggs co-vice chair of a blue ribbon panel tasked with analyzing the causes of underfunding in public pension plans and how governments can securely fund plans in the future. In 2014, Institutional Investor Magazine named him one of the 40 most influential people in the retirement world. In 2016, he was appointed by President Obama to be a member of the financial control board overseeing reforms to Puerto Rico’s budget and the restructuring of the island’s debts. Biggs holds a bachelor’s degree from Queen’s University Belfast in Northern Ireland, master’s degrees from Cambridge University and the University of London, and a Ph.D. from the London School of Economics.”

          Or Stephen Douglas (who calls the 23% “highly questionable”) and whose work experience as a CA Public Sector worker (before retiring on a CA Public Sector DB pension) included changing light bulbs ?

          Reply

        • ” I find an average federal salary premium of not 2 percent but of about 14 percent. My point is not that 2 percent is “wrong” and 14 percent is “right,” but rather that there is a range of reasonable answers found in studies of federal salaries and the CBO’s result is likely toward the lower end of that range.”

          A. Biggs, “How Do Federal Employee Salaries and Benefits Compare with the Private Sector?”
          May 18, 2017
          —————-
          My point is not that 23 percent is “wrong” but that there is a range of reasonable answers found in studies of state salaries and benefits. And Biggs was the outlier.

          And, stop me if you’ve heard this before, but that was data from up to 10 years ago.

          Reply

  3. I never like these state reports, because New York City has a separate pension system that is one of the most underfunded — and has the higher taxpayer contributions — in the country.

    Whereas the New York State system, which also covers local government employees in the rest of the state, is one of the best funded.

    How that is possible given that the state state legislature has set the rules for both for 40 years I don’t know. But whenever one of these reports come out, certain groups say “see there is no problem in New York.” Even though the New York City system is just as large.

    Reply

    • Posted by Tough Love on August 28, 2018 at 7:09 am

      It “happens” because those who do so (usually knowing that NYC’s Plans are in really lousy shape) invariably BENEFIT in one way or another from a continuation of the status quo, and fight even the most minor reforms.

      Reply

  4. Posted by dentss on August 28, 2018 at 8:11 am

    Pension was meant for working man, not overpaid bureaucrats, and/or anyone working the system to their advantage. Now the average working man/woman working government needs to start drawing on his/her pension as soon as they make the age requirement, but then go get another job.

    Reply

  5. Posted by Tough Love on August 28, 2018 at 8:44 am

    Interesting article…………….

    https://www.cbsnews.com/news/almost-half-of-americans-cant-pay-for-basic-needs/

    What % that fall into the group discussed do you think are Public Sector workers?

    I’d guess a near-zero %.

    And perhaps it’s the cost foisted upon Taxpayers of providing RICH Public Sector pensions and VERY generous Public Sector healthcare benefits at VERY low cost (BOTH while active and retired) ……….. that contributes to making the other Private Sector group so poor.

    Reply

    • Posted by Stephen Douglas on August 28, 2018 at 12:04 pm

      Deferred compensation.

      I don’t know the stats in California or New Jersey, but I have personally known several state employees on food stamps, section 8 housing assistance, and/or childcare subsidies. Some of these promote out of lower paying jobs, but others stay at that level their entire careers.

      Pensions are swell, but you can’t eat promises. Perhaps the public sector pensions are not quite as RICH as you think. Perhaps the public sector wages are not as RICH as you think.

      https://news4sanantonio.com/news/local/new-data-shows-thousands-of-state-employees-on-food-stamps-02-07-2017

      Reply

      • Posted by dentss on August 28, 2018 at 12:25 pm

        Their many more workers on welfare than the odd sprinkling of muni workers on it now ..

        Reply

      • Posted by Tough Love on August 28, 2018 at 1:14 pm

        Quoting …………….

        “Perhaps the public sector pensions are not quite as RICH as you think.”

        In your STate of CA ?????????????

        Come on now ………… they are ROUTINELY 4 to 6 times greater in value upon retirement than those typically granted the lucky few Private Sector workers still accruing DB pensions in the Private Sector.

        CA’s pension formulas are even richer than the ludicrously generous ones in NJ, and unlike NJ CA is still annually COLA-increasing their pension payouts (something almost unheard of in Private Sector Plans).

        And NO, the incremental value of CA’s MUCH MUCH MUCH richer Public Sector pensions & benefits FAR FAR outweighs any lower amount in wages ………. per the AEI Study, to the tune of 23%-of-pay, just like in NJ.

        Reply

      • I don’t know the stats in California or New Jersey, but I have personally known several state employees on food stamps, section 8 housing assistance, and/or childcare subsidies.

        Cough…Cough…”bullshit”…Cough, cough 🙂

        Reply

      • Perhaps the public sector pensions are not quite as RICH as you think. Perhaps the public sector wages are not as RICH as you think.
        Yet you always make comparisons to some backwards state instead of your own, CA:
        California Faces a $1 trillion Unfunded Pension Liability”
        That is TRILLION with a T.

        https://www.ocregister.com/2018/04/06/with-california-taxpayers-facing-a-1-trillion-unfunded-pension-liability-lawmakers-focus-on-foam-and-plastic-straws/

        Reply

    • Posted by Stephen Douglas on August 28, 2018 at 1:23 pm

      “…ROUTINELY 4 to 6 times greater in value upon retirement…”

      Logical fallacy

      “… 23%-of-pay, …”

      Bulls hit.

      Reply

      • Posted by Tough Love on August 28, 2018 at 1:33 pm

        I was actually LOW-BALLING the true multiples because:

        (a) most Private Sector workers don’t get DB pensions, but only 401KPlans …of LOWER value, and

        (b) Some CA cities also have “DROP” Plans. Include their completely ridiculous incremental value, and in those Cities the combined Pension/DROP is likely worth 10 times what comparably situated Private Sector workers get in retirement security.

        Reply

      • Posted by Stephen Douglas on August 28, 2018 at 3:54 pm

        Most Americans don’t get DB pensions –or– 401(k)s.

        But, on average, they do get higher wages.

        Reply

  6. For all of you who put your trust in government to take care of your retirement. Good luck with that.

    We each have made decisions throughout our lives that have everlasting consequences — where to work, where to live, move to another region or stay, etc.
    — whether to go to school to advance oneself or not.
    — buy a home vs. rent.
    — save vs. spend, new car vs. used car, etc.
    — bet on oneself or not.

    Good luck trying to convince taxpayers to make up for your poor decisions or indecisions.

    Reply

    • Posted by PS Drone on August 28, 2018 at 1:06 pm

      They won’t try to convince taxpayers. They will instead pay to “convince” their crooked, lying politician scumbags to increase taxes or cut services so that they continue to get their undeserved, ridiculously generous pensions and medical benefits.

      Reply

      • Posted by Tough Love on August 28, 2018 at 1:19 pm

        Yes they will ……….. and we (Private Sector Taxpayers) must work diligently NOT to allow it.

        Reply

        • Exactly.
          The new litmus test in the next ten years will be pension bailouts or not.
          The Sen. Sherrod Brown proposal is a trial-ballooned sham.

          Reply

          • Posted by Stanley on August 28, 2018 at 6:16 pm

            Lion, I think that you are right on that and I’m hoping that the trial balloon goes no where.

            But with so many not receiving a defined benefit pension, how can anyone argue for the bailouts with a straight face? I don’t see how Brown’s effort can be a vote winner even in Ohio. I’m reading that the Republicans may be competitive in the Ohio senate race. I hope so.

          • Posted by Tough Love on August 28, 2018 at 6:43 pm

            While the MPA bailout discussions MAY be a trial balloon …… and in my opinion, some parts under discussion WILL pass (unjustly & unfortunately for Taxpayers) ……….. I do NOT see that translating into a bailout of the ludicrously excessive (and in many case equally underfunded) PUBLIC Sector pensions.

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