State pension fund is in relatively good shape

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Georgia’s pension funds for retired state employees and teachers are in better financial shape than many other states, according to a study released this week by the Pew Center on the States.

The Pew Center said Georgia’s pension funds – the largest are the Teachers Retirement System (TRS) and the Employees Retirement System (ERS) – had enough funds set aside to handle 87 percent of the $79.9 billion in future pension benefits that have been promised to retirees.

That is higher than the 80 percent mark considered an acceptable level of funding for a state to meet future pension liabilities, according to the Washington, D.C.-based Pew Center.

“Most experts, including the Government Accountability Office, advise states to have at least an 80 percent funding level,” the Pew study said. “Thirty-one states were below this threshold in fiscal year 2009, a dramatic one-year increase from fiscal year 2008, when 22 states were less than 80 percent funded.”

Georgia lawmakers are also meeting their obligations to put enough money in the annual state budget to keep the pension fund solvent. According to the latest available numbers, Georgia made 100 percent of its required pension fund contribution of $1.32 billion in fiscal year 2009.

Georgia is not in such good shape, however, when it comes to setting aside funds to pay future healthcare costs that have been promised to retired employees. The state is on the hook for $20.3 billion in future healthcare costs but has funded only 4 percent of this liability.

“States had a total liability of $635 billion, but had saved only about $31 billion — slightly less than 5 percent of the total cost,” the Pew study said. “Nineteen states had set aside nothing to pay for these promises. These states continue to fund these benefits on a pay-as-you-go basis, covering medical costs or premiums as they are incurred by current retirees.”

The Pew study painted a disturbing picture of the likelihood that state pension funds will have the resources to pay future benefits to retirees. The states are an estimated $1.26 trillion in the hole in terms of having enough money set aside to pay pension and healthcare costs.

The 50 states combined had “$2.28 trillion stowed away to cover $2.94 trillion in long-term liabilities — leaving about a $660 billion gap,” the study said. “Retiree health care and other benefits accounted for the remaining $604 billion, with assets totaling $31 billion to pay for $635 billion in liabilities.”

Georgia is ahead of most states by funding 87 percent of its future pension liabilities. New York is at 101 percent, followed by Wisconsin at 100 percent and Washington state at 99 percent.

At the bottom of the pension funding barrel are Illinois (51 percent funding for future liabilities), Oklahoma (57 percent) and Kentucky (59 percent).

Among Georgia’s neighboring states, South Carolina has funded only 69 percent of its liabilities while Alabama has funded only 74 percent. North Carolina, on the other hand, is at 97 percent, while Tennessee is at 90 percent and Florida is at 84 percent.

© 2011 by The Georgia Report

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Tags: ERS , fiscal solvency , Georgia pension funds , retirees healthcare costs , TRS