New survey puts Oklahoma as second worst-funded state for government pensions
Published: March 29th, 2011
A new (March 24) report from The Fiscal Times lists Oklahoma as the second worst state in funding of government pensions. West Virginia was the worst of all.
Filling out the top 10 worst funded state pension structures were Illinois, New Hampshire, Louisiana, Alaska, Kentucky, Connecticut, Rhode Island, Indiana and Kansas, according to a chart accompanying an informative story by Adam Corey Ross.
The analysis was a cooperative venture between The Fiscal Times and the Center for Retirement Research at Boston College.
In an overview entitled, “Special Report: Best and Worst State Funded Pensions,” Ross noted that state pension funds over several years “have undergone a major transformation, as more and more of them are cutting back the amount of money they set aside for retired workers, gambling that they can meet their obligations through investments instead of savings.”
Ross reported that “A decade ago, slightly more than half the states in the U.S. had fully funded pension programs, but today only New York and Wisconsin can make that claim.” Funding mandates are in place in New York, but not in Wisconsin, Ross reported.
The 10 best states after New York and Wisconsin were Delaware, North Carolina, Washington state, South Dakota, Tennessee, Wyoming, Florida and Georgia.
Boston College’s public plans database contends state public-employee pension programs “are underfunded by a total of $708 billion,” Ross writes. There is some diversity in reporting on the subject, as the Pew Center on the States, analyzing 2008 data, has put the cumulative pension debt at $452 billion. Other analysts project even worse total unfunded pension debt.
CapitolBeatOK, in continuing research on the issue, has found Oklahoma consistently falls somewhere among the worst 15 states, depending on the criteria used by analysts. In no benchmark other than recent investment return does Oklahoma as a whole, across its government pension programs, look strong. The average for adequacy of government pension funding is 61%, according to state officials. The industry standard for the private sector is 80%.
In another recent analysis focused on pension issues, even a comparatively healthy state like Florida came up short. Jed Graham, writing in Investors Business Daily (March 25) called attention to concerns expressed by that state’s new governor, Rick Scott, who called pensions a “ticking time bomb.”
Graham’s point was that if investment returns fall short of the hopes of managers – as low as 6% rather than the hoped-for 7.75% annual return – the state’s unfunded liability could triple.
Here in Oklahoma, pension reforms have been discussed with increasing passion over recent months. Deputy state Treasurer Regina Birchum characterizes the state’s unfunded pension debt as a “looming crisis.”
Birchum’s boss, Treasurer Ken Miller, has said in public meetings the situation is at “crisis level.” His colleague on the state Pension Commission, Auditor & Inspector Gary Jones, says the problem has been caused by “a lack of responsibility.”
Moody’s Investor’s Service has announced it will begin to include unfunded pension liability in setting state bond ratings, potentially creating a credit crunch for future Oklahoma bonds. Northwestern University’s Joshua Rauh said last year Oklahoma would be the first state to run out of cash flow in its pension programs – in 2017.
State Sen. Mike Mazzei of Tulsa, chairman of the Senate Select Committee on Pensions, said pensions are “the issue that could implode us.” Mazzei and state Rep. Randy McDaniel of Oklahoma City are authors of measures in the state Legislature that could, taken together, alleviate the state’s estimated $16 billion shortfall by $5 billion or more.