America’s pension crisis may be much worse than we thought. A new report from State Budget Solutions looks at each state’s pension liabilities using a lower estimate of the rate of return than the states use themselves, and found that the country’s plans are underfunded by $4.1 trillion, and only 39 percent funded overall. The state-by-state breakdown looks even worse, with Illinois, Connecticut, Kentucky and Kansas holding plans that are less than 30 percent funded, and another 27 states below 40 percent. Other states have it bad as well: Reuters notes that in five states, pension liabilities more than 40 percent as large as the state’s economy as a whole, and in Ohio and New Mexico, they’re more than half as large. Considering that many people consider plans to be “safe” only when their funded level is over 80 percent, this is troubling news indeed.
These numbers are significantly higher than those we’ve seen before, which is due to the extremely conservative estimates of the rate of return. Rather than assuming a rate of return in the 7-9 percent range, as most plans do, State Budget Solutions is using the “risk free” rate of 3.225 percent, which is tied to the yield on treasury bonds.
I can’t help but feel that the pressure for inflation to bail all sorts of public-sector entities out of their indebtedness is going to grow and grow.
With no end in sight. The insufferable liberal ponzi scheme, promising what is impossible to cover.