Loop Capital: States' pension funding ratio drops in 2014

State pension plans' aggregate funded status declined 50 basis points in fiscal year 2014 to 72.6%, said the 13th annual public pension funding review by Loop Capital Markets.

Thirty-three states saw an increase in funded status in fiscal 2014 from the previous year, while 16 states saw their funded status decline and two were relatively unchanged. Idaho had the largest annual increase in its funding ratio, followed by Nebraska, Oklahoma and Oregon.

The number of states and District of Columbia reporting an increase in funded status has increased from 19 in fiscal 2013 and five in fiscal 2012. For many states, 2014 marked the first year since the recession when 2009 losses were not incorporated into their five-year smoothing periods. Washington, whose funding ratio declined the most at 6.7 percentage points, has an eight-year asset smoothing period. California, which reported a decline of 5.2 percentage points, calculates its assets on a market-value basis.

Longer term, over the past five years, 30 states have a lower funded status for fiscal 2014 than five years ago, 17 have increased their funded status and four have not changed since their 2010 levels.

Loop Capital Markets also analyzed large local pension funds.

Of the 20 cities for which the report had 2013 and 2014 data, Little Rock, Ark., and Los Angeles reported the largest annual funding increases of more than eight percentage points each, and Phoenix reported the largest decrease, more than seven percentage points, due in part to actuarial methods and assumptions.

Loop Capital analyzed 247 state pension funds from the 50 states plus the District of Columbia and 141 local pension funds, based on comprehensive annual financial report data as of the end of states' 2014 fiscal years.