A wave of reform swept the nation after the recession decimated public pension systems, but that wave in many cases has been too weak to stave off the coming crisis. In pension after pension, the gap between funding levels and future liabilities continues to grow.The problems vary somewhat from state to state state, but the most common issue with the reform measures passed so far is that they let states off the hook, requiring higher contributions from workers but keeping state contributions flat. New Jersey provides a pretty clear illustration of this approach in action, as the NYT notes:
Governor Christie’s office said the system’s “funded ratio,” a widely recognized indicator of pension health, had leapt to 65.2 percent after the 2011 changes, up from 56.4 percent before them. His office forecast savings of $122 billion over the next three decades.
But while the pension cuts helped lower the cost of the system, the state also created a new, 38-year funding schedule that began with no payment for one year. That was followed by a seven-year interlude, called “the ramp,” during which the state would gradually work its way up to proper funding. […]
But by 2018, the state itself forecasts, its system will have become shakier, with a funded ratio of just 52.3 percent, down from 2010, because its contributions will have trailed far behind the cost of the plan during the seven-year “ramp.”
Even in the best case scenario, the delay in the increase of state contributions will make the whole process more expensive than it would have been if the state simply bit the bullet and upped its contributions immediately. We can’t help but notice, too, another example of politicians putting off contribution increases until they are safely out of office. This reminds us more than a little bit of the kick-the-can game—often played with the unions’ full knowledge and support—that got pensions into this trouble in the first place. The fact that many of these reforms are written in a way that leaves current workers’ plans untouched but hits future workers’ benefits hard does nothing to dispel this notion.
To get a sense of the size of your state’s unfunded pension liabilities (as a percentage of state revenues), have a look at this chart: