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 In the last month of 2007, a report released by the Pew Center on the States sent shock waves throughout the country. It turns out that almost half the states have been under-funding their retirement plans for public employees like police officers. This dire news means that in the future the states may have to choose between meeting their pension obligations and funding ongoing programs.
All 50 states have promised to pay a total of $2.7 trillion in pension and retiree health benefits over the next 30 years and this does not even include separate retirement plans run by local governments. One of the study's authors, Richard Greene, said that $2.7 trillion is roughly the value of all investments worldwide in the information technology sector in just one year.
While some states are managing their costs reasonably well, the Center found that others, like New Jersey and West Virginia, have been poorly run and are now cutting education and health programs as they struggle to meet pension commitments made in some cases decades ago. According to a report by Mary Williams Walsh, a reporter for the New York Times, more states are at risk of being caught in a similar situation because they are not setting aside enough money now for future obligations to retirees. Walsh writes:
"Until now, there has been a paucity of independent data, making state-to-state comparisons nearly impossible. Previous attempts to rank state pension funds have been foiled by differences among plans. And efforts to describe the 'average' public pension fund have failed to show where the biggest problems were occurring, or to give credit to the most successful states. "Unlike companies, state and local governments are not subject to federal pension laws, which set uniform standards for private industry.
"If a company skips its required pension contributions, it can be required to pay a big excise tax. No comparable enforcement mechanism exists for states. "Even without federal oversight, some states, including Alabama, Arkansas and North Carolina, have been diligently prepaying their retirement obligations, the Center found. "But others have consistently let their contributions lag behind the amounts needed. The study showed that about half the states fell into each category. "Among the states that have fallen behind, some, like Florida and Iowa, have been skimping only slightly.
But several, including Illinois, Kansas, Oklahoma, Michigan, New Jersey, Virginia and Washington, have contributed far less than the required amount, year after year. "Other states appear to have been fully funding their pension plans, only to run into trouble in the last few years, at which point they started to fall behind. States in this situation include Colorado, Kentucky, Maryland and Ohio. "The report also noted that besides pensions, most states had promised health benefits to retired public workers and are only now starting to face that bill that's coming due."
The Pew Center on the States is a nonpartisan research body sponsored by the Pew Charitable Trusts Add this page to your favorite Social Bookmarking websites        
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