Flush with cash for the first time in years, Montana, Connecticut, Washington and other states are considering setting aside a portion of their budget surpluses to shore up their underfunded pension plans.
In a report published in December, the National Association of State Budget Officers projected California had $7.6 billion left over at the end of fiscal 2005, the highest among all states, followed by Texas with $3.7 billion, Florida, with $2.9 billion and Massachusetts, $1.9 billion.
"The improved revenue environment is going to take some of the pressure off defined benefit plans and give them a chance to move toward full funding," said Keith Brainard, director of research at the National Association of State Retirement Administrators, Georgetown, Texas.
Already, Montana lawmakers have approved contributing $100 million of the state's estimated $300 million surplus in fiscal 2006 to the $2.5 billion Montana Public Teachers' Retirement System, and $25 million to the $3.2 billion Montana Public Employees' Retirement System. Both are in Helena.
With the contribution, the teachers' system will be about 76.6% funded vs. 73.4% before the contribution, said David Senn, executive director. The employees' system was 87% funded at the end of its 2005 fiscal year on June 30, said Roxanne Minnehan, interim executive director. Figures on the funding level after the new contribution haven't been calculated yet, she said.
When the Connecticut Legislature convenes Feb. 8, Speaker of the House Jim Amann intends to introduce a bill calling for the state to set aside $246.2 million, or nearly half its projected fiscal year 2006 $524.4 million surplus, for the underfunded Connecticut Teachers' Retirement System, said Larry Perosino, a spokesman for Mr. Amann. The state had budgeted for a $562.1 million contribution for the 2005-2007 biennial budget session, but that left a $246 million shortfall, which Mr. Amann proposes the state contribute now, instead of waiting, Mr. Perosino explained.