Pension Cuts Feared as Unfunded State Pension Liabilities Hit $1.3 Trillion

Pension plan and bankruptcy
www.istockphoto.com/Credit:outline205

States Short of Funds to Pay their Pension Liabilities

Ratings agency Moody’s Corporation reports that the U.S. state governments are facing a whopping $1.3 trillion in unfunded pension liabilities, which are expected to further expand by the end of this fiscal year.

The states saw a $56.0-billion increase in unfunded pension liabilities in fiscal-year 2016, accounting for a 4.5% increase compared to the previous fiscal year. This has sparked a fear that state public sector retirees will soon face pension cuts.

Moody’s has identified low interest rates, underperforming returns, and insufficient contributions to the pension funds as the reasons that they are underfunded.

Moody’s warned, “About half the states are also not making sufficient payments to pension systems to prevent their unfunded liabilities from growing even if investment targets are met.”

Illinois was reported to be the state in the worst situation in fiscal-year 2016, with its unfunded pension liabilities being more than 487% of its revenue. Alaska landed the second spot, with unfunded liabilities in excess of 443% of its revenue. Connecticut took the third spot, at 285%.

What’s worse is that Moody’s expects this financial burden to further grow. The ratings agency projects that the unfunded state pension liabilities will hit $1.7 trillion by end of this fiscal year.

The growing unfunded status of state pension funds is of grave concern to retirees and retirees-to-be, who fear receiving lower-than-expected retirement income. Earlier this month, I informed readers of Kentucky’s pension crisis, which is causing fearful state employees to take early retirements in order to lock in their benefits.

The case of growing debt is alarming for all Americans as the country racks up $20 trillion worth of debt, with more piling on top. The bitter reality is that governments don’t have enough money to pay off their obligations, and the federal government keeps raising the debt ceiling in order to issue more debt to service its payments.

 

Source

Moody’s: State Pension Liabilities Hit $1.3 Trillion,” Newsmax, September 14, 2017.

Advertisement