Obama Causes Unfunded for Many states

States Have Unfunded Liabilities of $4.7 Trillion

State-level public pension plans are underfunded by a massive $4.73 trillion this year, according to a new report from State Budget Solutions — an amount equal to more than $15,000 for each American.

"This spells trouble for the millions of baby boomers who are quickly approaching retirement age and expect to collect the pensions promised to them by government officials," writes Joe Luppino-Esposito, author of the "Promises Made, Promises Broken 2014" report.

"State taxpayers who are not government employees will also feel the pinch, which could result in reduced government services as larger and larger portions of the states' budgets must be allocated to cover the public pension shortfall."

California carries the largest unfunded liability, $754 billion, followed by Illinois ($331 billion), New York ($307 billion), Texas ($296 billion), and Ohio ($289 billion).

But these large states have larger numbers of public sector employees, so simply looking at the total figures can be misleading. A better indicator of pension plan health is the funding ratio, which compares assets to liabilities.

By this yardstick, the Illinois pension plan is in worst shape, with a funding ratio of just 22 percent — it has assets of $95 billion, about 22 percent of its liabilities of $426.6 billion. Other states with low ratios are Connecticut (23 percent), Kentucky (24 percent), Alaska (25 percent), and Mississippi (27 percent).

The most well-funded state is Wisconsin, with a funding ratio of 67 percent.

On a per-capita basis, Alaska has an unfunded liability of $40,639 for each resident. Illinois has a liability of $25,740 per person, followed by Ohio ($25,028), Connecticut ($24,080), and New Jersey ($22,491). The lowest figure is in Tennessee, $6,500.

One reason for the huge unfunded liability numbers is that officials rely on overly optimistic returns on the investment of assets, Luppino-Esposito asserts.

Also, states are often guilty of not making the necessary annual contributions to the pension funds.

"State Budget Solutions found that in recent years several states have reduced the annual required contribution to the pension funds, or just skipped the payments altogether," the report notes. "New Jersey is the latest state to pull off this budget gimmick, reducing this year's payment by a whopping $4.2 billion as a way of 'balancing' the state's budget."