State And Local Pension Liabilities $2 to $3 Trillion Unfunded, CBO Report

From CBO, "The Underfunding of State and Local Pension Plans" May4, 2011:

According to the Public Fund Survey of 126 state and local pension plans, which account for about 85 percent of pension assets and participants in state and local pension plans in the United States, those plans held roughly $2.6 trillion in financial assets in 2009 but had about $3.3 trillion in liabilities for future pension payments. Thus, those assets covered less than 80 percent of liabilities, and unfunded liabilities (the amount by which liabilities exceed assets) amounted to roughly $0.7 trillion. That share of liabilities covered by assets in 2009 was the lowest percentage in the past 20 years. By comparison, the amount of state and local governments' debt that was outstanding at the end of 2009 was $2.4 trillion.

That estimate of unfunded liabilities is calculated on the basis of actuarial guidelines currently followed by state and local governments. Another approach for measuring pension assets and liabilities, which more fully accounts for the costs that pension obligations pose for taxpayers, yields a much larger estimate of unfunded liabilities for those plans in 2009—between $2 trillion and $3 trillion.

In any event, most state and local pension plans probably will have sufficient assets, earnings, and contributions to pay scheduled benefits for a number of years and thus will not need to address their funding shortfalls immediately. But they will probably have to do so eventually, and the longer they wait, the larger those shortfalls could become.[Emphasis added].

Read the entire report here.

The Under Funding of State and Local Pension Plans