The average funding ratios of state and local government pension funds is expected to decline to 72% by 2013, according to the Center for State & Local Government Excellence.
That forecast comes in a brief that said state and local government plans' average funding status was 78% in 2009, down from 84% a year earlier.
“While states and localities were on a path toward full funding of their pension liabilities, they were seriously knocked off track by the financial crisis,” according to the brief, “The Funding of State and Local Pensions: 2009-2013.”
Major increases in plan contributions would be unrealistic to expect, in part because some state courts have issued rulings barring public employers from changing contribution requirements for existing employees, according to the brief.
Tax revenues, another potential source of plan contributions, have been decimated by the recession. “Thus, finding additional taxes to make up for market losses will be extremely difficult,” according to the brief.
“One small step that would be viewed as a commitment to responsible funding would be for states and localities to at least pay” their full annual required contribution, the brief continued. “Otherwise, the only option is to wait for the market and the economy to recover.”
Alicia Munnell, director of the Center for Retirement Research, and Jean-Pierre Aubry and Laura Quinby, CRR research associates, were the brief's authors.