The state Retirement System is $21 billion in the hole, and lawmakers are trying to figure out what to do about it.
But if that mountain of unfunded liability—the difference between what the system has to pay and has promised to pay—doesn’t worry you, this should—
“That’s debt that the state has an obligation to make up,” state Comptroller General Richard Eckstrom told lawmakers Tuesday. A joint Statehouse committee, which is reviewing the plan, heard from stakeholders and representatives of those covered under the $26 billion plan.
“It’s money that the state has an obligation to put into the plan that it hasn’t put into the plan,” Eckstrom said.
Ecstrom, who serves on the State Fiscal Accountability Authority, blamed the liability on a “fragmented, patchwork” system of oversight. The Retirement System, Public Employee Benefit Authority, General Assembly and SFAA all share the responsibility, he said.
And just where is the General Assembly going to get the money to fully fund the plan? Lawmakers are sifting through testimony from experts to decide that.
Already stretched retirees pleaded with legislators not to further fund the plan on the backs of members. Members paying into the system already pay a higher percentage of their incomes, compared to members of other state pension plans.
Here’s what taxpayers need to know about the current state of the system—
- The Retirement System serves a combined 321,000 retirees and active participants, those currently working and paying into the system
- More retirees are collecting benefits than those paying in. The fund currently collects approximately $2 billion in contributions and pays out $3 billion.
- The state’s aging population is impacting the retirement system. The system grew by 30,000 retirees to more than 150,000 from 2009 to 2015. During that same time, approximately 6,000 contributing members left the system.
- The General Assembly has set the rate of return at 7.5 percent. The plan has earned a 4.66 percent rate of return over the past 10 years, while the national average during that time was 5.66 percent.
- The Retirement System Investment Commission was created in 2005 and was the last in the country to have statutory authority to invest in equities.
- Active participants are paying in 8.66 percent of their salaries, compared to the national median of 5.98 percent. Employers pay in 11.56 percent, compared to the national median of 11.51 percent.
- The system was almost fully funded in 1999. Today the system is approximately 60 percent funded.