Last night in my mailbox was the new FedGazette of the Minneapolis Federal Reserve, and on its cover was the headline "Pension deficit disorder
." After yesterday's news
, it seemed almost karmic. Inside are plenty of good data, including:
[T]he problem of underfunded local and state pensions is widespread. The Municipal Employees' Retirement System of Michigan, a plan paying retirement benefits to about 19,000 beneficiaries, was 77 percent funded at the end of 2004. Sounds mostly funded, right? Yes, technically, except that a 23 percent shortfall translates to $1.4 billion in unfunded liabilities�money that will have to be found somehow, somewhere ...
Michigan is hardly alone. Two of Montana's largest pension plans, which cover better than 90 percent of all local and state employees, have a combined $1.5 billion in unfunded liabilities. The North Dakota Teachers' Fund for Retirement has accrued unfunded liabilities of almost $500 million; the largest single fund in Minnesota, the Public Employees Retirement Association (PERA), stared at a pension shortfall in 2005 of $4 billion, more than double the level just three years earlier.
And then there's the Minneapolis Teachers' Retirement Fund: For every dollar of benefit it expects to pay out in the future, the fund has only 46 actuarial cents. A 2003 state commission report noted that a combination of factors would likely lead the fund to become more deficient over time�which has, in fact, happened�creating �a dim picture indeed for this fund. Without early and substantial corrective legislation, this fund may face the very real possibility of running out of assets.� The report remarked, literally in bold print: �legislative attention is urgently needed.�
The article links to spreadsheets and charts with data for your perusal, which if you are a public employee in the upper Midwest you should see. The problem we're seeing here locally is repeated in the other states.