This is a guest post by Gregory Mennis, director of state public-sector retirement systems for The Pew Charitable Trusts. It is a response to “Late to the public pension game,” from April 2.
The Pew Charitable Trusts has been reporting on state and local pension data since 2007 and we applaud Reuters’ attention to this important public policy issue. Cate Long’s April 2 blog post “Late to the Public Pension Game” questioned why our report, “The Fiscal Health of State Pension Plans: Funding Gap Continues to Grow,” relied on 2012 data, saying it was out of date. These key points explain why Pew’s latest report relies on 2012 data.
Pew has consistently used the states’ own numbers for all of its analysis, and 2012 is the most recent year for which data for all 50 states is available. Comprehensive data for 2013 won’t be available until later this year. Cate Long’s post cites a Wilshire Consulting report that fills in the gaps of the 2013 state data with Wilshire’s own estimates and projections. Wilshire also calculated states’ plan assets on a market-value basis, rather than using the numbers as reported by state pension plans. Our practice is not to modify, alter, or project data forward.
While the Wilshire report demonstrates that funding is improving on a market-value basis, a number of research groups and economists also believe the funding gap is even greater than our report’s analysis. We believe that using states’ own numbers and being consistent and transparent in our approach allows people using our data to be confident that the pension debt facing states is accurately reported.
The 2012 data allows us to provide information about states’ individual plans. Some states have close to 100 percent of the assets needed to pay for pension promises. They’ve also regularly made the full actuarial-recommended contributions. This demonstrates that pensions can be managed so that they are affordable and sustainable. But several states have set aside less than half of what is needed to pay for pension obligations, and many are falling short on contributions—with two states averaging only 34 percent of recommended amounts over the past three years. Wilshire and the Federal Reserve, which were cited in the blog post, only provide aggregate figures and do not report on individual states’ records in following responsible funding practices, as our report does.