Pension systems in at least six states are fighting funding cutbacks in the courts, in state legislatures and on the election ballot.
Although public pension plans overall seem to be in good shape, some - such as Illinois, Montana, New Jersey, Connecticut, Virginia and Maine - are still slapping their state government's hands away from employee benefits.
Data from a Public Pension Coordinating Council survey show the average pension benefit obligation funding ratio grew to 86.8% in 1994 (the most recent data available) from 84.4% in 1992. But the survey also points out only 57% of the plans surveyed are making their full actuarially determined employer contribution.
"There is always a lot of discussion concerning whether money was taken out. More than likely, it wasn't put in," said Cathie Eitelberg, a consultant at Segal Consulting, New York, and former director of pensions and benefits at the Government Finance Officers Association, Washington.
In fact, this is the case in each of the states where government officials might be forced to make the actuarially determined contributions to their pensions.
Illinois officials are debating whether to appeal an Aug. 13 state appellate court decision against the state concerning unmet pension obligations of between $2 billion and $3 billion. The class-action suit against the state was filed by a plaintiff from each of the state's five retirement systems: Illinois State Employees; Illinois Teachers; Illinois State University System; the General Assembly System; and the Judges Retirement System.
The state's retirement systems have a total of $21.5 billion in assets and $19.4 billion in unfunded liabilities (up from $17 billion in 1994).
The plaintiffs in the case sued over a 1994 law that lowered the systems' funding level to 90% and increased the funding period to 50 years. In its ruling, the court validated a 1989 law that required the state to attain a 100% funding level in a period of 46 years, said Michael Mory, executive secretary of the State Employees', Judges and General Assembly Retirement Systems.
The appellate court decision still leaves some questions to be answered, such as the amount the state will need to put into the pension funds and if the state would owe lost investment returns.
These questions will be answered when the case either is sent back to district court or appealed to the Illinois Supreme Court.
Maine Attorney General Andrew Ketterer is appealing an Aug. 1 federal court decision declaring part of a 1993 law unconstitutional.
Public teachers filed the class-action suit against trustees of the $4.2 billion Maine State Retirement System, contending a 1993 law was a raid on the pension fund.
Under the law, the state increased employee contributions to 7.65% from 6.5%, imposed an earnings cap and allowed cost-of-living adjustments to be made annually instead of every six months.
Assistant Attorney General Cabanne Howard, who is in charge of the case, said the state is in the process of filing an appeal to the 1st U.S. Circuit Court of Appeals in Boston.
Linda King, administrator of the Montana Retirement Board, is hoping that soon-to-be drafted legislation to increase the state's funding of the Judges Retirement System will be approved by the Legislature early next year.The legislation would increase the state's contribution to 36% of salary as opposed to the 6% of salary it now contributes. Employee contributions would remain at 7% of salary under the proposal.
The legislation would make the state responsible for covering the system's unfunded liabilities, instead of increasing district court fees, which now contribute 35% of salary.
The judges system has $26.5 million in assets. The unfunded liability was $1.89 million as of June 30, 1994, the most recent data available.
The state always has been responsible for the system's liability, but until now has not met its total obligation, according to Ms. King.
A proposal to draft this legislation has been approved by an interim legislative committee.
New Jersey's pension funds have undergone significant underfunding in recent years. Overall, the state pension systems' funding status fell to 88.9% in 1995 from 97.6% in 1993.
The reason for a drop in funding levels could be the series of changes in actuarial assumptions made by the state in recent years, beginning with Gov. Jim Florio's administration, which lowered the amount of contributions to New Jersey's pension plans by $769 million.
The trend continued with the administration of Gov. Christine Todd Whitman with a law reducing state contributions and COLAs lowering the amount the state contributed to the retirement system by $1 billion. The administration recalculated the state's assumptions because it realized they didn't need to pay as much in to the fund, said Roland Machold, director of the state's division of investment.
The New Jersey Teacher's Pension and Annuity Fund has filed a suit against the state and so far nothing has been decided upon, according to Mr. Machold.
In Connecticut, State Treasurer Christopher Burnham plans on fighting state cutbacks in contributions to the Connecticut Public Employees Retirement System by taking his case to the Legislature in January 1997. Mr. Burnham cites an unfunded liability of more than $6 billion and the lowering of state contributions by 50% as his reasoning for going the Legislature. He will be proposing legislation to require the state to meet its actuarial commitment.
"New England has faced a devastating recession in recent years. These reductions were to get through the tough times," said Mr. Burnham. He now believes Connecticut is emerging from economic hardship and is in better shape to fund its retirement system.
A referendum on making the $22 billion Virginia Retirement System an independent public trust will be on this November's ballot.
The question will be whether to enact a constitutional amendment to limit the use of retirement funds to the payments of benefits, refunds and administrative expenses and to allow investments to be made "solely in the interests of the members and beneficiaries of the system." Retirement system spokesman Bill Sullivan said the referendum will make it impossible for the fund's assets to be used to balance the state's budget.