On June 18, 2012, the Pew Center on the States released an update to their report, "The Widening Gap," which addresses state liabilities and costs for pensions and retiree health care benefits. The report asserts that States “continue to lose ground in their efforts to cover the long-term costs of their employees’ pensions and retiree health care,” and that in fiscal year 2010, states were $1.38 trillion short of having saved enough to pay their “retirement bills,” a nine percent increase from the year before, according to Pew.
It’s our hope that readers will understand there are two sides to every coin and that it’s important for the sake of progress to have above-board discussions about what is happening in the world of pensions. Our recent blog about Alaska and their lumping of healthcare costs into pension dynamics is very similar to Pew’s treatment of the issue. And of course using old data at market lows is tantamount to all-out political propaganda and not worthy of serious debate. We wish it weren’t so. – Max Patterson
However, the Pew report’s analysis uses old data that fails to reflect recent market gains. As Keith Brainard, NASRA’s Director of Research, points out, by relying on FY 2010 data, “the dates the Pew study is using to measure the condition of many public pension plans are near the low point of the recent investment market decline.” Nearly one-half of plans in the NCTR/NASRA Public Fund Survey have an actuarial valuation date that pre-dates their fiscal year-end date, usually by one year, Keith notes.
Also, in order to arrive at the $1.38 trillion figure, Pew once again combines pensions with retiree healthcare. As NCTR and NASRA have noted in the past, retiree healthcare cost containment options, financing structures and benefit protections are entirely different from those of pensions. Pew’s decision to couple retiree healthcare with pension liabilities distracts from the issues States face with these very different benefits.