Twenty-five U.S. states contributed less money to their retirement funds in 2009 than actuaries calculated was needed to support the plans, up from 23 a year earlier, Loop Capital Markets said in a report.
Twenty states, including lowest-rated California and Illinois, failed to make adequate payments to teacher and public employee funds for any of the three years from 2007 to 2009, the Chicago-based investment bank said Friday in a summary of its annual analysis of U.S. retirement funds.
“It’s an area where it’s easy to cut, and you don’t get a lot of pushback,” Chris Mier, a Loop strategist, said in a telephone interview. “A lot of states took advantage of that.”
Persistent underfunding, coupled with investment losses during the fiscal year that ended June 30, 2009, left 91 of the 145 state retirement funds studied with assets worth less than the 80 percent of future benefits that actuaries say is adequate, the report said.
“As only 24 of 73 pension plans with assets over $1 billion are currently considered funded, it is clear there is a serious issue that needs to be addressed,” the report said.
Underfunding of pensions has been cited as a reason for credit downgrades in Illinois, New Jersey and other states this year. A Bloomberg analysis of state pensions found that funding levels across the 50 states ranged from 51 percent in Illinois to 107 percent in New York.
The recession left states facing a total of $110 billion in revenue shortfalls, according to the Washington-based Center on Budget and Policy Priorities.