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Isles among 34 states behind in funding pensions

By Associated Press


SPRINGFIELD, Ill. » As the recession took its toll, many states diverted scarce money away from pension plans to pay for more immediate concerns, and the amount of new costs that states will owe the public retirement funds in the decades ahead ballooned to $757 billion, according to a study released Monday.

The Pew Center on the States found that 34 states failed to maintain safe levels of money in the pension funds, which most experts agree is about 80 percent of long-term obligations. Four states — Connecticut, Illinois, Kentucky and Rhode Island — didn't even have 55 percent of the money they'll need in the long run.

Hawaii has funded just 61 percent of its $18.5 billion pension obligation for public sector workers — the 10th worst in the nation. Hawaii also has a $14 billion retiree health care liability that is unfunded.

Wes Machida, administrator of the State of Hawaii Employees' Retirement System, said, "Over the past couple of years the board of trustees has been initiating legislative proposals to deal with the significant and escalating pension liabilities."

Total public sector pension liability and percent funded:
State Liability % Funded
Illinois $138.8 billion 45%
Rhode Island $13.4B 49%
Connecticut $44.8B 53%
Kentucky $37B 54%
Oklahoma $36.4B 56%
Louisiana $41.4B 56%
West Virginia $15B 58%
New Hampshire $9B 59%
Alaska $16.6B 60%
Hawaii $18.5B 61%
Source: Pew Center on the States

On July 1, the state will enact pension reform for new members, including lower benefits and a requirement to work longer. New hires also will be required to contribute more — between 8 percent and 14.2 percent of income — to the pension fund. The previous range was 6 percent to 12.2 percent.

The total gap between the money all states had available and what they will have to pay out in the decades ahead reached $757 billion in 2010, the most recent year for which figures are available. That was up 9 percent from the year before, according to the study titled "The Widening Gap Update."

The Pew Center found most states were trying to deal with the funding gap, either through cutting benefits for future employees or requiring workers to pay more of their earnings into their retirement funds. Some went after benefits for current employees, triggering court battles. States also adopted more conservative estimates for what they will earn on investments down the road.

Pensions aren't the only retirement problem. States also faced a $627 billion shortfall in health care services for retirees. Essentially, for every $1 they will eventually have to pay out in health care, states had set aside only 5 cents.

"So why should Americans care about these funding gaps? Because the larger they are, the higher the cost to taxpayers today and for many years to come," said David Draine, a senior researcher for the Pew Center on the States.

Nationwide, about 22.5 million public workers fall under a state pension plan. When states fall behind in their retirement contributions, they will have to come up with even more money later to make up the difference. In addition, pension and retiree health costs are growing, driving up state expenses even more. That leaves states less and less each year to spend on education, public safety and other government services.

While the new report looks at figures from 2010, pension expert Robert Rich said there is no reason to think the situation has improved significantly.

Rich, executive director at the University of Illinois' Institute of Government and Public Affairs, stressed that the recession was not the chief cause of the pension problem, although it contributed by eating away at the value of investments.

For years, states failed to pay their full share of pension costs, he said, so the problem won't be wiped away if the economy improves.

"It took us a long time to get into this hole, and it's going to take a long time to get out of it," Rich said.

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st1d wrote:
"Wes Machida, administrator of the State of Hawaii Employees' Retirement System, said, "Over the past couple of years the board of trustees has been initiating legislative proposals to deal with the significant and escalating pension liabilities." . . . . . . . . . . . . . . . . . . yet, machida is doing nothing about the main cause of the employees' retirement system: the state keeps skimming away profits of the ers whenever the ers investments return more than 8%. if the state skims profits in excess of 8% from the ers, then, perhaps whenever ers investments return less than 8%, the state should make up the difference. . . . . . from the hawaii business, february 2011: "Machida says these assumptions aren’t the main reason the state’s unfunded liability has grown so dramatically. He ascribes most of the increase to an old rule that allowed legislators to seize any annual earnings over 8 percent and apply them to the state’s ARC. In 2001, the worst year, the state used approximately $150 million of these “excess” earnings to help balance the budget."
on June 19,2012 | 02:14AM
Changalang wrote:
HART is negligent on promised Federal Rail funding as well: " Honolulu rail planners are counting on $250 million from the federal government next year. But if the Republican-controlled U.S. House of Representatives has anything to say about it, the amount could be far less. The House Appropriations Committee — the lower chamber's version of the body Hawaii Sen. Dan Inouye chairs in the Senate — will take up the Transportation, Housing and Urban Development (THUD) funding bill at 10:15 a.m. Washington time Tuesday. The version passed out to the full committee by the THUD subcommittee would give Honolulu $100 million in Fiscal Year 2013 — $150 million less than Inouye had gotten through the Senate and President Barack Obama had requested in his original budget. In all, the subcommittee recommended New Starts funding about $420 million lower than Obama's request. The subcommittee, chaired by Republican Tom Latham of Iowa, made its cuts to the appropriations bill June 7 but members had been mum about what changes were made. Neither Mazie Hirono nor Colleen Hanabusa are members of the subcommittee or the full Appropriations Committee. The subcommittee's markup report was made available online Monday. " (CivilBeat, M. Levine; 18JUN2012) $100 million vs. the promised Rail Federal Funding of $1.55 Billion. Bend Over Honolulu, Here It Comes Again. B0HIC0.
on June 19,2012 | 10:59AM
Changalang wrote:
B0HIC0 = Bend Over, Here It Comes Oahu ! B0HHICA = Bend Over Honolulu, Here It Comes Again ! My Bad; pick your favorite. The story ends the same way. :)
on June 19,2012 | 11:15AM
NanakuliBoss wrote:
Take your soap box to another forum.BOCHCMF, bend over changster, here comes my foot.
on June 19,2012 | 01:15PM
Changalang wrote:
You are going to need it to run from the big boys when they blame you guys for the failure of the negative campaigning which will be credited for a non-optimal outcome in the coming elections. Best you take good care of your footsies. Besides, if I bend over you will get all Snow White on me and start saying, "Mirror, mirror, on the wall, who's the fairest of them all." :)
on June 19,2012 | 04:27PM
NanakuliBoss wrote:
Lol ster.
on June 19,2012 | 08:58PM
Bean808 wrote:
I think you hit a nerve.
on June 19,2012 | 04:08PM
Changalang wrote:
This should too......The realistic way to cost shift the ERS fiscal pariah is to tax pensions in the State of Hawaii. Then, the upside down payout will cycle back into State Coffers via the increase secondary to pension tax revenue. The free ride in paradise for the least productive needs to end. If pension retirees don't throw anything into the island melting pot, they will never be able to think of anyone else on the Aina except for themselves. Tax free income in this day and age where every country and State needs more revenue is simply a travesty of justice, especially to the working poor that used to be known as the middle class. ;)
on June 19,2012 | 07:47PM
localguy wrote:
What these state workers do not want to hear is the defined benefit retirement is jurassic, unaffordable in today's economic conditions. Workers will have to be shifted over to 401k programs with them funding some of their own retirement. Taxpayers cannot be tasked to come up with the trillion dollars state governments failed to supply / raided over the years. We need to follow the auto companies and the federal government who made the move to survive. Workers have to realize their retirement is their responsibility to fund. Live below your means, save money, quit buying so many toys. I will retire in December at age 57 with no debt, no mortgage, and about $1 million in assets to include my federal TSP/401k and military retirement. All those years I saved and invested paid off. It can be done. Most don't plan to fail. They fail to plan.
on June 19,2012 | 02:56AM
hawaiikone wrote:
One can infer from your comment that you are a "double dipper"? Remember, the federal retirement system is far more of a burden to this country than this state's issues. And the feds can simply print more money to cover the rising burden of their retirement system.
on June 19,2012 | 05:11AM
localguy wrote:
I have fully funded my my 401k, making catchup contributions for being over 50. Say what you want, I worked with the retirement laws set up at this time. 401k is not guaranteed. I deal with it. Do you?
on June 19,2012 | 12:16PM
hawaiikone wrote:
No problem with double dipping. As you said, it's legal. Just seems a little hypocritical for you to be accepting your defined benefits while attacking others for doing the same. Myself? I have a private pension which I paid for, as well as deferred annuities, no mortgage, and assets enough to be comfortable. All earned outside of public service. Frugality is a necessity for us all. Just wish our government would see that as well.
on June 19,2012 | 04:53PM
lee1957 wrote:
You should take a course in reading comprehension. The federal TSP is a 401k account, not a defined benefit program. Hard to post credible comments from an ignorant position.
on June 19,2012 | 07:36PM
hawaiikone wrote:
Take your own advice. He states he has a military pension. Who's ignorant now?
on June 19,2012 | 08:41PM
allie wrote:
true...no pensions will be paid especially due to low productivity
on June 19,2012 | 08:04AM
BRock wrote:
Once again you speak without knowledge. Show us why you feel there is "low productivity" on the part of pensioners.
on June 19,2012 | 11:20AM
NanakuliBoss wrote:
Ah, hello Allie? Are you there? Pensions are paid to retirees, therefore they,the retirees are retired! Soooooooooo, there is no or low productivity from them. Kapshi?
on June 19,2012 | 01:08PM
charja wrote:
Agree with "localguy" shift to 401K, public workers need to create their own retirement fund (IRA or Roth IRA) and not have their retirement tied to the government (city, county and state). Also, do away with factoring in overtime for present employees on "old" pension system, and I don't mean reducing the percentage - I mean totally eliminating it. Years of allowing overtime to be used in calculating pension is taking it's toll.
on June 19,2012 | 08:52AM
hawaiikone wrote:
Agreed, for future employees, but honor the commitments already made. Anything else is morally wrong.
on June 19,2012 | 04:55PM
BRock wrote:
Maybe you should give up your military retirement check since you feel so strongly about the ills of defined pension plans. Put your money where your mouth is!
on June 19,2012 | 11:18AM
lee1957 wrote:
You could have joined the military too, unless you were a cat 4.
on June 19,2012 | 07:38PM
ShibaiDakine wrote:
It takes the Associated Press to run a story about the underfunding of the pension and post retirement benefit funds for Hawaii's great metropolitan newspaper to publish what i have been repeatedly writing in these comment sections for years.  This is not news. It is an ongoing performance that has been playing at the big square Kabuki Theater for more than a decade and has been reported on by other credible local news sources in Hawaii.  As the Pew Center points out, the gap has been widening on the underfunded accrued liabilities and, i predict, at this point Hawaii cannot "dig itself out of the hole" without comprehensive reforms to the state's retirement benefits.  The numbers in the Pew report are somewhat dated and appear to be taken from data found in the state's FY 2011 comprehensive annual financial report (CAFR) which ended in June 2011.  Needless to say, the gap has widened significantly since then.  The fact that this does not make the front page of the great metropolitan newspaper is in part why the problem exists and why it continues to get worse.  Do the names Wisconsin or Greece come to mind?  They should. 
on June 19,2012 | 04:39AM
allie wrote:
on June 19,2012 | 08:04AM
Changalang wrote:
When the tick gets bigger than the dog, both parasite and host go blood hungry.
on June 19,2012 | 05:38PM
roughandtough wrote:
The State Govt. has grown to big to meet the demands of its people. What happened in the old days of the State? There was enough to fund the pension plans and take care of running the government. Just because some special intrest group needs money for this or that the State is quick to jump in and put its hand into the General Fund ( a never ending pot of money). When you are caught or audited then you finally realize, there's not enough money !! So what happens next, you look at whats avaliable and now take money from this fund or that find, that has its own savings plan to pay off your debts. A No one knows when a hurricane will come. We can have the best tracking system for the weather, but what happens if a Hurricane hits and we all put money into this(hurricane insurance) to protect ourselves. What happens when the real thing hits and when we look for the money to repair our homes where is this now ? Oh...the Govt. spent this...so here are your credit vouchers and hopefully a contracotr or a bussiness will accept this?? As a bussines peron would you take a voucher...when would will you see your money ? Stop raiding one pot to pay another, control State spending and speical intrest groups, go back to a simpler way of life. Raising taxes is not the answer !
on June 19,2012 | 05:29AM
soundofreason wrote:
The beast (govt) always learns to spend whatever it is given - or takes. Need to just stop feedning the beast.
on June 19,2012 | 07:01AM
Changalang wrote:
The beast has many ravenous offspring that must be fed, somehow.
on June 19,2012 | 07:57PM
WesleySMori wrote:
on June 19,2012 | 05:01PM
allie wrote:
These pensions will never be fully paid. Too many promises were made without full disclosure to the public.
on June 19,2012 | 08:01AM
Maneki_Neko wrote:
If we all put fingers in our ears and yell "neener, neener, neener" real loud, we won't hear anything more about the problem and maybe it will just go away. Oh, that's not my idea, it's the official State strategy.
on June 19,2012 | 08:12AM
false wrote:
well u just like to meow and ask for your Cat Chow.
on June 19,2012 | 01:30PM
Changalang wrote:
The pensions will be paid. It is in the State Constitution. The State Legislature will do what they did for Rail in worse case scenario; add a Statewide GET interval tax increase to cover the shortfall, no matter how high it is. This is their retirement plan also. So, they can either amend the Constitution; or kick themselves to the curb for retirement. The only thing that can save the Hawaii taxpayer is a Federal law that will allow all States to file for bankruptcy protection chapters already in statute. The Nat'l GOP is intent on passing this legislation. Then, it becomes a matter of a "harmed class" to force Hawaii to declare bankruptcy in Federal Court. Ugly paths forward, either way. The Hawaii Supreme Court will have to side with the State Constitution per the job description.
on June 19,2012 | 11:07AM
false wrote:
u sound like a Lawyer. I sound like a pedestrian, as u can see by my post at 1:24PM below.
on June 19,2012 | 01:29PM
Changalang wrote:
Knowledge of the law is the real MMA of the new Millennium in America; law and order are the new high value rules in the game of life.
on June 19,2012 | 05:35PM
false wrote:
By the way, I know Vicky is helping u.
on June 19,2012 | 01:33PM
Changalang wrote:
Somebody has to. I am fortunate to still not be a missing person yet. :)
on June 19,2012 | 07:56PM
kahu808 wrote:
Let us not forget those behind Act 100 and those who raided the pension fund. Who allowed this to happen, and who put a stop to it.
on June 19,2012 | 12:34PM
false wrote:
Well u know we can blame the highest levels of government for not doing their best for us, however in the case of our State of Hawaii, we are being held hostage by the Unions. The Unions would not allow great leaders to lead us, because the Unions hoodwink us into voting in the same old same old, and yet if the people, that is, the Unions want their pensions funded, they do not get good results from the brass (i.e., The Executive Branch and The Legislative Branch), because the Unions themselves supported the WRONG CANDIDATES in the first place. Ha Ha Ha Ha Ha Ha !!!!!!
on June 19,2012 | 01:24PM
Changalang wrote:
The same old candidates have the most vested to pull the most out of the bankrupt fund; makes sense.
on June 19,2012 | 06:19PM
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