Friday, May 18, 2007

Standard & Poor’s Reports on state Pension Funding Levels

A recently released Standard & Poor’s report shows the unfunded accrued liability (UAL) for Louisiana’s principal state pension funds was roughly $10.8 billion this past year amounting to a per capita UAL of $2,385. Principal state pension funds included in the S&P report were public employees’ retirement systems and teachers’ retirement systems.

“The per capita UAL for these retirement systems was more than three times that amount. Reducing the UAL is extremely important for the health of our retirement system,” said State Treasurer John Kennedy.

Another measure of the financial health of principal state pension funds is the funded ratio. The funded ratio is calculated by dividing assets by liabilities, so the higher the percentage the better. The mean funded ratio for state pension funds nationwide was 81.8 percent in this year’s S&P report. The funded ratio for teachers’ and public employees’ retirement systems in Louisiana was 63.5 percent.

“Simply put, these retirement systems have more money going out than there is coming in,” said Treasurer Kennedy. “We can make a significant step toward fixing the problem by using some of the state’s budget surplus to shore up our retirement systems. It would be the fiscally responsible thing to do, especially because the rating agencies will begin taking a closer look at the UAL when considering the state’s credit rating.”