States Dig Out from Pension System Debt
Samuel Stebbins, 24/7 Wall St. for Center Square
Public employee pension systems are some of the largest financial liabilities on state government balance sheets. The 50 states have over $4.5 trillion in cumulative pension liabilities combined, roughly double the amount all 50 states spent in fiscal 2020. For years, state pension systems were woefully underfunded in much of the country, but according to a recent report from the Pew Charitable Trusts, this trend may be reversing.
Driven by higher investment from both employees and employers, state pension systems have largely stabilized as of 2020. Since 2007, states across the country have more than doubled annual pension contributions, often cutting funding for other programs to do so.
Still, some states are better positioned to pay public sector employees in retirement than others. In Montana, pension liabilities totaled an estimated $17.5 billion in 2020. Meanwhile, the state’s pension assets totaled $11.8 billion. Considering both assets and liabilities, Montana’s pension funding ratio is 67.3%, the 20th lowest in the country.
According to 2021 estimates from the Bureau of Labor Statistics, the Montana state government employs some 27,800 people, or 5.6% of the total private and public sector workforce in the state.
It is important to note that 2020 is the most recent year for which comprehensive state level data is available and that the recent market downturn has all but erased much of the financial gains states have made in recent years. Still, while markets are always susceptible to turmoil, improved policies have gone a long way to improving pension funding in much of the country.
All state pension data in this story was compiled by the Pew Charitable Trusts using comprehensive annual financial reports from each state.