State improves pension rankings
By Samuel Speciale, Capitol reporter, Charleston Daily Mail
The country’s public employee pension funding shortfall is set to eclipse $1 trillion, according to new research from the Pew Charitable Trust, but the study has found that states like West Virginia have made significant moves since the 2008 recession to close that gap.
According to the report, released Tuesday and presented to state retirement officials on Wednesday, West Virginia has dramatically improved its pension funding rank over the last decade, moving from dead last in 2003 to 27th in 2013, the latest year for which data is available.
During that time frame, the state’s funding ratio has increased, from 40 percent to 67 percent, good for a spot at the middle of the 50-state ranking.
Despite the improvement, West Virginia’s pension system is still lacking by industry standards with more money still being promised to workers than what is available. In 2013, the state had $16.7 billion in pension liabilities, more than $5 billion of which was unfunded. Most experts believe pension systems need to be funded at least 80 percent to be considered healthy. The national average comes in only at 71 percent.
Still, recognition for its improvements is seen as a good mark by state retirement officials. West Virginia Consolidated Public Retirement Board executive director Jeffrey Fleck said Wednesday he was proud to report favorable news for once.
The board administers retirement benefits to teachers, judges, state troopers and other public employees.
Once one of the worst-funded pension systems in the country, West Virginia policymakers over the years have implemented “strong contribution policies” to substantially close its funding gap, the report says.
According to the report, West Virginia is one of 20 states in 2013 to pay its full actuarial required contribution — the recommended amount set aside to fund retirement benefits. The report says that practice, along with debt payments out-pacing interest on pension debt, has reduced the amount of unfunded liabilities.
But funding changes could be coming, the report indicated.
For years, states have closed pension funding gaps with investment returns from the stock market. The report says that no longer is a reliable option.
“State and local policymakers ... instead need to put in place funding policies that put them on track to pay down pension debt,” the authors say in their report.
Past measures state officials have used to tackle the debt include using budget surpluses to shore up pension reserves.
In 2005, then-Gov. Joe Manchin and the Legislature were faced with more than $10 billion in pension debt, which was partially addressed by privatizing workers’ compensation and using budget surpluses.
Going back further, pensions were in an even worse state in the 1990s when teacher retirement benefits were funded at a mere 8.8 percent, which prompted lawmakers to adopt a 40-year plan to pay off all of the state’s unfunded pension liabilities — the amount of money still owed on state employee retirement plans.
Teachers’ pensions are now more than 50 percent funded.
The report also said the health of pension systems will be better assessed next year when new standards will be used to evaluate 2014 data.