3. Connecticut
> Pct. liability funded: 53%
> Total liability: $44.8 billion (22nd largest)
> Total funded: $23.8 billion (24th smallest)
> S&P credit rating: AA
Connecticut has fallen short of paying its full annual pension payout three times between 2005 and 2010, and just over half of its liabilities were funded. In 2011, state unions agreed to concessions worth $1.6 billion, including changes to pensions, to avoid widespread layoffs. Some of the concession the unions agreed to, among others, were raising the retirement age by three years for those who retire after 2017 and increasing the penalty for employees who retire early. Despite the changes, Moody’s Investor Services downgraded the state’s credit rating from Aa3 to Aa2. The downgrade was partially due to unsustainably high retirement costs and “pension funded ratios that are among the lowest in the country.”
4. Kentucky
> Pct. liability funded: 54%
> Total liability: $37.0 billion (24th smallest)
> Total funded: $20.0 billion (17th smallest)
> S&P credit rating: AA-
Since 2005, Kentucky has repeatedly failed to pay its entire annual recommended pension contribution. In 2010, Kentucky funded just 58% of its recommended contribution of $1 billion. Only four other states failed to contribute less than 60% of their recommended amounts. Overall, the state’s pension program is just 54% funded, and it has nearly $20 billion in unfunded obligations. In a study in August, Pew warned that required contributions for Kentucky’s pension system could nearly quadruple by 2031. It cited a declining stock market, employer contribution shortfalls and incorrect assumptions by actuaries among the reasons for the state’s funding gap.
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5. Louisiana
> Pct. liability funded: 56%
> Total liability: $41.4 billion (25th largest)
> Total funded: $23.2 billion (23rd smallest)
> S&P credit rating: AA
In 2010, Louisiana faced an $18 billion funding gap in its public pension system. Lawmakers are not blind to the problem — the Louisiana legislature approved pension reform in both 2009 and 2010, which included higher employee contributions and limits on cost-of-living increases. The legislature passed more pension reform in 2012, which would move new government employees onto a 401(k)-style plan. But the law, scheduled to take effect in July 2013, has been challenged by the Retired State Employees Association and others on the grounds that two-thirds of the legislature, rather than just a simple majority, must approve the pension changes.
6. Oklahoma
> Pct. liability funded: 56%
> Total liability: $36.4 billion (23rd smallest)
> Total funded: $20.4 billion (18th smallest)
> S&P credit rating: AA+
According to Pew, from 2005 to 2010 Oklahoma regularly did not pay its full annual recommended contribution. In 2010, Oklahoma contributed only 70% of the recommended $1.5 billion. Overall, $16 billion in state public pension liabilities were unfunded as of 2010. In an attempt to lower the gap, Oklahoma raised the retirement age from 62 to 65 and also reduced benefit increases associated with the rising cost of living for retirees last year. Two of the largest 100 pension funds in the nation are in Oklahoma, the Teachers’ Retirement System of Oklahoma and the Oklahoma Public Employees Retirement System.
7. West Virginia
> Pct. liability funded: 58%
> Total liability: $15.0 billion (12th smallest)
> Total funded: $8.7 billion (10th smallest)
> S&P credit rating: AA
The largest pension system in the state, the West Virginia Teacher’s Retirement System, is not even funding half of its annual pension obligations as of June 2011. The pension has accrued about $8.9 billion in liabilities. Pew notes that West Virginia lawmakers approved benefit cuts in 2011 by reconfiguring how final salaries are calculated. More cuts could be on the way. The state legislature is currently debating a proposal that would raise the retirement age to 62 from 60 and would require state employees to contribute 6% of their pay to the pension, up from 4.5%.
8. New Hampshire
> Pct. liability funded: 59%
> Total liability: $9.0 billion (6th smallest)
> Total funded: $5.3 billion (3rd smallest)
> S&P credit rating: AA
Between 2005 and 2010 the state has been unable to meet the recommended levels of contributions twice. Although it reached its targets in 2010, in recent years New Hampshire has cut benefits, increased required contributions by plan members and raised the retirement age for new employees from 60 to 65. According to Milliman, the New Hampshire Retirement System was in the worst quartile among publicly funded major pension programs for the amount of liabilities that were unfunded. As of last year, just 36.5% of plan members — one of the lowest percentages in the country — were retired or inactive, meaning that most of the fund’s liabilities were from state employees still paying into the program.
9. Alaska
> Pct. liability funded: 60%
> Total liability: $16.6 billion (13th smallest)
> Total funded: $10.0 billion (12th smallest)
> S&P credit rating: AAA
Alaska has only fully funded its pension twice between 2005 and 2010, which allowed the funding gap to increase to more than $6 billion by 2010. The pension system faced a $6.6 billion deficit, or 40% of total pension liability. Alaska has in recent years tried to wean employees off of traditional pensions. In 2006, Alaska became one of just two states to offer new employees a defined-contribution plan similar to a 401(k). But there remains nearly five employees with a pension plan for every one employee with a defined-contribution plan. The state’s largest retirement program, the State of Alaska Public Employees’ Retirement System, has accrued nearly $10.4 billion in liabilities, or $176,000 for every active or retired employee.
> Pct. liability funded: 53%
> Total liability: $44.8 billion (22nd largest)
> Total funded: $23.8 billion (24th smallest)
> S&P credit rating: AA
Connecticut has fallen short of paying its full annual pension payout three times between 2005 and 2010, and just over half of its liabilities were funded. In 2011, state unions agreed to concessions worth $1.6 billion, including changes to pensions, to avoid widespread layoffs. Some of the concession the unions agreed to, among others, were raising the retirement age by three years for those who retire after 2017 and increasing the penalty for employees who retire early. Despite the changes, Moody’s Investor Services downgraded the state’s credit rating from Aa3 to Aa2. The downgrade was partially due to unsustainably high retirement costs and “pension funded ratios that are among the lowest in the country.”
4. Kentucky
> Pct. liability funded: 54%
> Total liability: $37.0 billion (24th smallest)
> Total funded: $20.0 billion (17th smallest)
> S&P credit rating: AA-
Since 2005, Kentucky has repeatedly failed to pay its entire annual recommended pension contribution. In 2010, Kentucky funded just 58% of its recommended contribution of $1 billion. Only four other states failed to contribute less than 60% of their recommended amounts. Overall, the state’s pension program is just 54% funded, and it has nearly $20 billion in unfunded obligations. In a study in August, Pew warned that required contributions for Kentucky’s pension system could nearly quadruple by 2031. It cited a declining stock market, employer contribution shortfalls and incorrect assumptions by actuaries among the reasons for the state’s funding gap.
[More from 24/7 Wall St.: States That Drink the Most Beer]
5. Louisiana
> Pct. liability funded: 56%
> Total liability: $41.4 billion (25th largest)
> Total funded: $23.2 billion (23rd smallest)
> S&P credit rating: AA
In 2010, Louisiana faced an $18 billion funding gap in its public pension system. Lawmakers are not blind to the problem — the Louisiana legislature approved pension reform in both 2009 and 2010, which included higher employee contributions and limits on cost-of-living increases. The legislature passed more pension reform in 2012, which would move new government employees onto a 401(k)-style plan. But the law, scheduled to take effect in July 2013, has been challenged by the Retired State Employees Association and others on the grounds that two-thirds of the legislature, rather than just a simple majority, must approve the pension changes.
6. Oklahoma
> Pct. liability funded: 56%
> Total liability: $36.4 billion (23rd smallest)
> Total funded: $20.4 billion (18th smallest)
> S&P credit rating: AA+
According to Pew, from 2005 to 2010 Oklahoma regularly did not pay its full annual recommended contribution. In 2010, Oklahoma contributed only 70% of the recommended $1.5 billion. Overall, $16 billion in state public pension liabilities were unfunded as of 2010. In an attempt to lower the gap, Oklahoma raised the retirement age from 62 to 65 and also reduced benefit increases associated with the rising cost of living for retirees last year. Two of the largest 100 pension funds in the nation are in Oklahoma, the Teachers’ Retirement System of Oklahoma and the Oklahoma Public Employees Retirement System.
7. West Virginia
> Pct. liability funded: 58%
> Total liability: $15.0 billion (12th smallest)
> Total funded: $8.7 billion (10th smallest)
> S&P credit rating: AA
The largest pension system in the state, the West Virginia Teacher’s Retirement System, is not even funding half of its annual pension obligations as of June 2011. The pension has accrued about $8.9 billion in liabilities. Pew notes that West Virginia lawmakers approved benefit cuts in 2011 by reconfiguring how final salaries are calculated. More cuts could be on the way. The state legislature is currently debating a proposal that would raise the retirement age to 62 from 60 and would require state employees to contribute 6% of their pay to the pension, up from 4.5%.
8. New Hampshire
> Pct. liability funded: 59%
> Total liability: $9.0 billion (6th smallest)
> Total funded: $5.3 billion (3rd smallest)
> S&P credit rating: AA
Between 2005 and 2010 the state has been unable to meet the recommended levels of contributions twice. Although it reached its targets in 2010, in recent years New Hampshire has cut benefits, increased required contributions by plan members and raised the retirement age for new employees from 60 to 65. According to Milliman, the New Hampshire Retirement System was in the worst quartile among publicly funded major pension programs for the amount of liabilities that were unfunded. As of last year, just 36.5% of plan members — one of the lowest percentages in the country — were retired or inactive, meaning that most of the fund’s liabilities were from state employees still paying into the program.
9. Alaska
> Pct. liability funded: 60%
> Total liability: $16.6 billion (13th smallest)
> Total funded: $10.0 billion (12th smallest)
> S&P credit rating: AAA
Alaska has only fully funded its pension twice between 2005 and 2010, which allowed the funding gap to increase to more than $6 billion by 2010. The pension system faced a $6.6 billion deficit, or 40% of total pension liability. Alaska has in recent years tried to wean employees off of traditional pensions. In 2006, Alaska became one of just two states to offer new employees a defined-contribution plan similar to a 401(k). But there remains nearly five employees with a pension plan for every one employee with a defined-contribution plan. The state’s largest retirement program, the State of Alaska Public Employees’ Retirement System, has accrued nearly $10.4 billion in liabilities, or $176,000 for every active or retired employee.
