Market battering state pension funds around the country

During this spring’s legislative session, the Kentucky General Assembly continued its discussion about the underfunding of the pension fund for its employees, and returned in special session this summer to pass modest reforms. 

Years of funding at lower than expected levels while maintaining high benefit levels have left the state pension system – Kentucky Retirement Systems – facing a shortfall of hundreds of millions of dollars in the future. 

Kentucky and other states are now facing a second challenge as the continued slide in the financial markets has jeopardized the money set aside for the retirement of state employees. 

Stephen Fehr with Stateline.org has the story today about impact of the financial decline on the money states have tucked away to take care of their employees in retirement. 

Fehr found states are considering putting off cost-of-living increases and cutting benefits to help offset the declines. 

Among the losses being reported – Virginia’s state worker pension fund had dropped $11 billion, or about 20 percent, since July; North Carolina’s dropped 12 percent over the last year; Tennessee’s $30 billion fund fell 10.7 percent since July 1. 

Kentucky was one of 20 states listed as falling below the goal of having their pension funds 80 percent funded. Kentucky’s is only 71.9 percent funded, according to the figures of The Southern Legislative Conference and Council of State Governments cited by Fehr.

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One Response

  1. States really must cut back on their pension benefits to the maximum allowable under law, and should also wind down all defined benefit plans going forward. With the Feds bailing out banks, I wouldn’t be surprised if they bailed out any state that ran into trouble as well.This portends to be a problem that will cost tax-payers over a trillion dollars some day.

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