A new measure of public pension liabilities released Thursday by Moody's Investors Service found a wide range in the ratio of net pension liabilities to state revenue, from a low of 6.8% for Nebraska to 241% for Illinois.
The median value for all 50 states was 45%.
In the report, Moody's recalculated fiscal 2011 state pension data using a bond-market-determined discount rate, and factored in the percentage of liabilities owed to states by local governments. Moody's launched its new approach as a way to increase comparability among plans by investors and credit analysts, said Marcia Van Wagner, Moody's vice president and senior analyst in the public finance group. “Our interest is in the impact of their liability,” she said in an interview.
The new measure could add to the confusion over the cost and sustainability of public pensions, public pension advocates warn.
Looking at pension obligations as a form of debt “is a fundamentally different way of looking at it than the way actuaries look for funding purposes,” said David Driscoll, a principal with Buck Consultants. Elizabeth Kellar, president and CEO of the Center for State and Local Government Excellence, agreed that for policymakers, “it's more about how do you develop a funding plan that's going to work? We're really stressing that you need to be paying the full (annual required contribution.)“
A separate CSLGE report on public pension funding also issued Thursday based on an analysis by the Center for Retirement Research at Boston College found that under current GASB standards, the funded status of public plans dipped to 73% in 2012 from 75% in 2011. The report also found that 80% of public plan sponsors paid their annual required contributions in 2012, roughly the same as in 2011. Funding levels were projected to move above 80%, assuming a healthy stock market return of 7.75%, “but it doesn't change the fact that people have to get back to paying as close to 100% (of the ARC)as they can,” said Ms. Kellar in an interview.