Several states, including Colorado, Illinois, Kentucky and Minnesota, are taking steps to mitigate their respective pension funding crises.
Although the legislative remedies differ, recurring measures in many of the bills include direct contributions from the states themselves, increasing participant contribution rates and capping cost-of-living adjustments.
Experts agreed that underfunded state plans are a national crisis but also pointed out that the problem is best solved by the individual states.
"Each state's system is unique, so I don't think there's a federal solution, nor am I aware of any of my brothers in the pension system asking for one," said Ron Baker, interim executive director of the $48 billion Colorado Public Employees' Retirement Association, Denver. "It's a local issue, and we're not asking for federal help for what works best in every state or municipality."
Colorado Gov. John W. Hickenlooper Jr. signed into law on June 4 a pension reform bill designed to reduce investment risk and improve the funded status of the state's public employee retirement system. Among other things, the law increases the contribution rate for most Colorado PERA participants and directs the state to allocate $225 million each year to the pension fund to reduce its unfunded liability. Colorado's pension funding ratio was 46% as of 2016, the fifth lowest in the U.S., according to data from Bloomberg.
"We were projected to be ... 20% funded in 40 years," Mr. Baker said. "We weren't projected to be out of money, but something needed to be done to be fully funded within 30 years."
Mr. Baker also pointed out that credit ratings agencies had warned Colorado a credit downgrade was possible if a solution wasn't found. "It was important not just for the pension plan, but for the broader state of Colorado," he said.
Because of the changes, Mr. Baker said he expects PERA's soon to-be-released financial statements to show that all five of its divisions are on track to be fully funded in 30 years.