States Pension Gaps Exceed $1.25 trillion

By: Lisa Lambert
April 26, 2011

(Reuters) - States are short $1.26 trillion in paying for public employee pensions and other retirement benefits, a gap that grew 26 percent in one year and will take many more years to wipe out, according to a report released on Tuesday.

A total of 31 states had pensions that were underfunded in fiscal 2009, the latest year for which data is available, up from 22 states a year earlier, the Pew Center on the States reported.

The financial crisis in 2008 crushed many pension funds' investments, just as historic budget woes forced governments to cut contributions to those funds.

The combination "made a serious problem even worse," said Susan Urahn, the Pew Center's managing director.

In fiscal 2009, which for most states began in July 2008, states were short $660 billion for future pension payments and $604 billion for other retiree benefits, namely healthcare.

Growing unfunded pension liabilities on top of still daunting state budget gaps are a top concern of Wall Street rating agencies and investors in the $2.9 trillion municipal bond market. Most states are legally bound to pay retirees benefits, and they must make up for any investment loss from their already depleted treasuries or by borrowing.

Pensions are deemed "underfunded" when they are unable to pay at least 80 percent of liabilities.

Preliminary data for fiscal 2010 shows that pension funding levels of 10 states deteriorated further, while just three registered increases, Pew found.

"Overall, these results suggest that while states benefited from better returns in fiscal year 2010, the legacy of the financial crisis ... will remain an issue for years to come," Pew said in the report.

Last year, Pew found states were short $1 trillion in fiscal 2008 on promises to retirees, using data that came from before the financial crisis.

States typically assume an 8 percent annual return and their pension plans suffered a median 19.1 percent drop in their assets' market value in fiscal 2009, Pew said. One critic said the lagging data does not reflect the improvement in current conditions.

"Given where we are in time now, talking about 2009 numbers just isn't useful. The world has changed in the last 18 months," said Hank Kim, executive director of the National Conference of Public Employee Retirement Systems. "The market has come roaring back."

On Monday, Kim's group released a survey of 216 public pension funds showing the average return over the last year was 13.5 percent.

Illinois consistently has had the lowest pension funding level among states, one that worsened to 51 percent in fiscal 2009 from 54 percent in fiscal 2008, according to the Pew report. In fiscal 2010 and 2011, the state sold $7.16 billion of taxable bonds to raise money for its annual pension payments.

A year ago, Governor Pat Quinn signed into law a pension reform measure reducing benefits for new state workers, which he said would save more than $200 billion over nearly 35 years. The U.S. Securities and Exchange Commission is looking into "communications" by the state regarding potential savings or reduced contributions to pensions resulting from the law.

Five other states, including cash-strapped Rhode Island, have funding levels of less than 60 percent, according to Pew. Conversely, New York's pension is 101 percent funded, followed by Wisconsin at 100 percent and Washington at 99 percent.

States must increase their contributions when returns are low. From 2000, when the systems were well funded, to 2009 these payment requirements grew 152 percent, putting pressure on states to take dollars away from other spending areas.

Of late, Republicans in the U.S. Congress have pressed states to assume investment return rates closer to 4 percent, which they consider "riskless."

Using assumptions that private pension plans rely on, which are linked to returns on corporate bonds of about 5.22 percent, Pew found the pension shortfall for states could be as much as $1.8 trillion. By relying on a rate based on a 30-year Treasury bond, Pew found the states' shortfall could be $2.4 trillion.

(Additional reporting by Karen Pierog in Chicago. Graphic by Stephen Culp; editing by Leslie Adler)

Baby Boomers Approaching 65 and a bit Glum (Pew Reasearch Center)

Pew Research Center
By D’Vera Cohn and Paul Taylor
12/20/10

The iconic image of the Baby Boom generation is a 1960s-era snapshot of an exuberant, long-haired, rebellious young adult. That portrait wasn’t entirely accurate even then, but it’s hopelessly out of date now. This famously huge cohort of Americans finds itself in a funk as it approaches old age.

On January 1, 2011, the oldest Baby Boomers will turn 65. Every day for the next 19 years, about 10,000 more will cross that threshold. By 2030, when all Baby Boomers will have turned 65, fully 18% of the nation’s population will be at least that age, according to Pew Research Center population projections. Today, just 13% of Americans are ages 65 and older.

Perched on the front stoop of old age, Baby Boomers are more downbeat than other age groups about the trajectory of their own lives and about the direction of the nation as a whole.

Some of this pessimism is related to life cycle – for most people, middle age is the most demanding and stressful time of life. Some of the gloominess, however, appears to be particular to Boomers, who bounded onto the national stage in the 1960s with high hopes for remaking society, but who’ve spent most of their adulthood trailing other age cohorts in overall life satisfaction.

At the moment, the Baby Boomers are pretty glum. Fully 80% say they are dissatisfied with the way things are going in the country today, compared with 60% of those ages 18 to 29 (Millennials); 69% of those ages 30 to 45 (Generation Xers) and 76% of those 65 and older (the Silent and Greatest Generations), according to a Pew Research Center survey taken earlier this month.

Boomers are also more downbeat than other adults about the long-term trajectory of their lives – and their children’s. Some 21% say their own standard of living is lower than their parents’ was at the age they are now; among all non-Boomer adults, just 14% feel this way, according to a May 2010 Pew Research survey. The same survey found that 34% of Boomers believe their own children will not enjoy as good a standard of living as they themselves have now; by contrast, just 21% of non-Boomers say the same.

The 79 million member Baby Boomer generation accounts for 26% of the total U.S. population. By force of numbers alone, they almost certainly will redefine old age in America, just as they’ve made their mark on teen culture, young adult life and middle age.

In 1970, when the oldest of the Baby Boomers were in their early 20s, the total publicly held national debt was about $283 billion, or about 28% of the Gross Domestic Product. Now, as the oldest Boomers approach age 65, the federal debt is an estimated $9 trillion or 62% of GDP – creating IOUs that members of younger generations may be paying down for decades.

However, a new Pew Research survey finds little appetite among Boomers for deficit reduction proposals that would take a bite out of their own pocketbooks. For example, 68% of Boomers (compared with 56% of all adults) oppose eliminating the tax deduction for interest paid on home mortgages; 80% (compared with 72% of all adults) oppose taxing employer-provided health insurance benefits; and 63% (compared with 58% of all adults) oppose raising the age for qualifying for full Social Security benefits. Pew Research complete report

One child in 10 in the United States lives with a grandparent (Pew Research Center)

By Gretchen Livingston and Kim Parker
Pew Research Center
September 9, 2010

One child in 10 in the United States lives with a grandparent, a share that increased slowly and steadily over the past decade before rising sharply from 2007 to 2008, the first year of the Great Recession, according to a new Pew Research Center analysis of U.S. Census Bureau data.

About four-in-ten (41%) of those children who live with a grandparent (or grandparents) are also being raised primarily by that grandparent,1 according to the census data.

This figure -- 2.9 million children -- rose slowly throughout the decade and it, too, spiked from 2007 to 2008. In that single year, there was a 6% increase.

The phenomenon of grandparents serving as primary caregivers is more common among blacks3 and Hispanics than among whites,4 but the sharpest rise since the recession began has been among whites.

The number of white grandparents primarily responsible for their grandchildren rose by 9% from 2007 to 2008, compared with an increase of just 2% among black grandparents and no change among Hispanic grandparents.

Almost half (49%) of children being raised by grandparents also live with a single parent. For about four-in-ten (43%) of these children, there is no parent in the household. About 8% have both parents in the household, in addition to the caregiver grandparent.

Whether or not they live with and raise their grandchildren, being a grandparent is central to the lives of most older Americans. According to a 2009 Pew Research Center survey, 80% of those ages 65 and older have grandchildren, as do 51% of those ages 50-64.5 The survey finds that grandparents place a premium on time spent with their grandchildren.

Just as the number of children being cared for by their grandparents has increased from 2000 to 2008, the corresponding number of grandparents serving as primary caregivers to their grandchildren increased 8%, from 2.4 million in 2000 to 2.6 million in 2008.

Three percent of that increase occurred from 2000 to 2007, and 5% occurred from 2007 to 2008.

Among grandparents who serve as primary caregivers for grandchildren, there are notable differences by race, ethnicity and income. More than half of grandparent primary caregivers (53%) are white, while 24% are African American, 18% are Hispanic and 3% are Asians. In comparison, in the population ages 50 and older, 78% are white, 10% are black, 8% are Hispanic and 4% are Asian.

While grandparents who serve as primary caregivers for their grandchildren are disproportionately black and Hispanic, the increase in grandparent primary caregiving across the decade has been much more pronounced among whites. From 2000 to 2008, there was a 19% increase in the number of white grandparents caring for their grandkids.

 Link to complete study