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Pension Funding Failure Poses Serious Risk To The States

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New report finds nearly $7 trillion in unfunded pension liabilities across the 50 states.

Arlington, Va. – The American Legislative Exchange Council (ALEC) is proud to announce today’s release of Unaccountable and Unaffordable, 7th Edition, an annual report analyzing unfunded public pension liabilities for every state. This year, those unfunded liabilities total $6.96 trillion nationwide – an average of nearly $21,000 per person.

Understanding The Pension Crisis

“Understanding our pension crisis is difficult, but thankfully this report charts a path for legislators to permanently solve this growing problem,” said ALEC CEO Lisa B. Nelson. “Absent a fix, the fiscal meltdown of state pension funds threatens to leave American taxpayers on the hook for trillions of dollars in unfunded liabilities.”

Unaccountable and Unaffordable, 7th Edition focuses on the unfunded pension liabilities per capita in each state to illustrate the magnitude of the shortfalls:

States with the Lowest Unfunded Pension Liability (per capita)

States with the Highest Unfunded Pension Liability (per capita)

1.      Tennessee: $7,657.99

     46.    Connecticut: $34,717.89

2.      Indiana: $8,041.77

     47.    California: $35,786.97

3.      Florida: $10,743.78

     48.    Hawaii: $36,508.16

4.      Idaho: $11,236.20

     49.    Illinois: $36,925.66

5.      Nebraska: $11,658.52

     50.    Alaska: $46,080.40

“When it comes to public pensions, keeping the promises made to state workers and retirees is critical,” said ALEC Chief Economist and Executive Vice President of Policy Jonathan Williams. “Without major reforms — such as switching to defined contribution plans — pension promises will be harder to keep, and taxpayers will be forced to bail out unfunded pension plans at great personal expense.”

“Politically motivated investment schemes are also a growing threat to the solvency of state pension funds,” added Williams. “These strategies reduce investment returns over the long term, which leads to underfunding in state pension plans across the country with taxpayers ultimately footing the bill for the shortfalls.”

This comparative analysis of state pension systems, performed by ALEC’s Center for State Fiscal Reform since 2016, is a valuable tool for state legislators striving to keep promises made to retired public employees while protecting taxpayers through responsible pension reforms.

“Every state pensioner should have confidence that their retirement funds are being invested for maximum growth and not to promote a political agenda,” said ALEC Vice President of Policy Lee Schalk. “To ensure promises to workers and retirees are honored and hardworking taxpayers are protected, states lawmakers should examine the new ALEC model State Government Employee Retirement Protection Act.”

The ALEC Center for State Fiscal Reform strives to educate decision makers and the general public on the principles of sound fiscal policy and the evidence that supports those principles. This is done by personalized research, policy briefings in the states and by releasing nonpartisan policy publications for distribution.

About the American Legislative Exchange Council

The American Legislative Exchange Council is the largest nonpartisan, voluntary membership organization of state legislators in the United States. For more information about the American Legislative Exchange Council, please visit: www.alec.org.

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