Time Is Running Out to Fix the Pension Crisis in These 10 States

These states' pensions are in the worst shape.

For years, few things were as reliable as the pensions that many employers would offer workers for their years of dedicated service, particularly in the public sector. After a career of service, most police officers and firefighters could typically rely on the fact that their long-term needs in retirement would be well-covered by a steady stream of income in the form of their government pension.

Unfortunately, though, today several states are doing far worse than the rest of the country when it comes to securing the necessary funding for their pension obligations into the future, according to a new study from GOBankingRates.

The study compared the total size of a state’s unfunded pension liabilities in 2016 and 2017, how much it increased year over year, how much those liabilities represent on a per-capita basis, what the 2016 and 2017 funding ratios — the percentage of total pension obligations currently funded — were and how much the ratios changed year over year. The results show that a great many states are currently grappling with large pension obligations that, at the moment, they don’t appear ready to pay.

Here’s a look at the 10 states where the pension crisis has hit the hardest:

StateUnfunded Liabilities 20172017 per Capita2017 Funding Ratio
1Connecticut$127,788,768,899$35,73119.7%
2Arkansas$58,430,317,385$19,55331.1%
3Mississippi$80,403,262,959$26,90224.2%
4Kentucky$111,369,923,048$25,10020.9%
5Hawaii$40,089,375,714$28,06327.2%
6Alaska$33,896,375,418$45,68930.2%
7Oregon$109,451,211,506$26,73833.2%
8Illinois$388,342,219,353$30,33623.3%
9California$987,774,192,764$25,16632.9%
10Colorado$118,394,342,516$21,36928.6%

 

The 10 states with the biggest pension crises show that the issue isn’t limited to a particular region or type of state. It might be easy to see Arkansas, Kentucky and Mississippi and conclude that large, unfunded pension liabilities are typically an issue among poor Southern states with low average incomes and high poverty rates.

However, that conclusion certainly doesn’t explain why Connecticut, California, Colorado, Illinois, Hawaii and Alaska also appear among the 10 states in the worst shape, as all of those states feature average household incomes in excess of $80,000. In fact, Connecticut, Alaska, Hawaii and California are all among the top 10 states for highest average income, making it clear that rich and poor states alike are struggling with this issue.

Here are the 10 states where the pension crisis is the least dire:

StateUnfunded Liabilities 20172017 per Capita2017 Funding Ratio
1Kansas$38,541,732,859$13,25732.1%
2Utah$37,459,414,421$12,27741.5%
3New York$345,252,415,832$17,48546.3%
4South Dakota$11,710,286,670$13,53148.1%
5Tennessee$50,553,359,525$7,60145.9%
6Oklahoma$53,161,039,762$13,54935.6%
7Wisconsin$59,602,602,815$10,31461.5%
8Maine$18,547,934,726$13,93041.4%
9Nebraska$18,688,179,588$9,79939.7%
10Virginia$114,619,581,764$13,62637.1%

 

The pension crisis also isn’t a large state versus small state issue. While California and Illinois, the states with the most and the third-most total unfunded pension obligations, are both in the 10 states with the largest crises, New York has the fifth-most total unfunded liabilities but is the third-strongest state in the study, and Florida is the seventh-highest state for unfunded pensions but finished just outside the top 10 states with the best handle on the crisis.

New York is one of the best states for pensions because it managed to decrease its obligations from 2016 to 2017 and was one of just five states that improved its funding ratio over the same time period.

GOBankingRates

Only three states decreased their unfunded liabilities per capita from 2016 to 2017: Kansas, Utah and New York. All three states are among the best for pensions.

Click through to read How Long $1 Million Will Last in Retirement in Every State.

Methodology: GOBankingRates analyzed all 50 states in terms of three overarching factors: (1) unfunded pension liabilities for 2016 and 2017; (2) unfunded pension liabilities per capita for 2016 and 2017; and (3) funding ratio of public pension plans for 2016 and 2017, sourced from American Legislative Exchange Council. States were scored using these three factors and scored for their respective year-over-year change for each metric. Scores were combined, with unfunded pension liabilities receiving half weight since larger states naturally have larger liabilities, while all other factors received full weighting.