State Government and Banking & Finance and Public Pensions and Public policy

Pew study questions health of Indiana's public pensions

April 10, 2010

The Washington, D.C.-based Pew Center on the States has “serious concerns” about Indiana’s long-term ability to pay for its public employee pensions. And PEW says Indiana “needs improvement” in setting aside money for retirees’ future health care and other benefits.

In its 2010 report “The Trillion Dollar Gap,” Pew identifies $3.4 trillion in total employee retirement payments that U.S. states have promised cops, firefighters, teachers and other state workers. But states have collectively set aside only $2.4 trillion to pay their bills.

And Pew warns the actual situation may be worse.

“Pew’s numbers likely underestimate the bill coming due because the most recent available data do not account for the second half of 2008, when states’ pension fund investments were particularly affected by the financial crisis,” read the Pew report.

Pew points out that Indiana’s state pension assets increased 99 percent from 1999 to 2007, while its liabilities grew only 76 percent. Even so, it believes Indiana hasn’t set enough aside, particularly in support of its future obligations for retired teachers.

“Indiana’s management of its long-term pension liability is cause for serious concern, and the state needs to improve how it handles its retiree health care and other benefit obligations,” the report read. “It has funded only 70 percent of its total pension bill—well below the 80 percent benchmark that the U.S. Government Accountability Office says is preferred by experts.”

According to Pew, Indiana is one of 19 states that have failed to put money aside to pay for future retiree health care and benefits obligations. It puts the state’s unfunded price tag in this area at $442.3 million.

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