Local public pension funding ratios up to 80 percent: survey
(Reuters) - Large local public pension funds in the United States were, on average, 80 percent funded as of June 30, 2011, up from an average of 72 percent the previous year, according to a survey of plans released on Monday by Wilshire Associates.
The plans have seen their funding ratios -- the difference between total assets and the retiree benefits to be covered -- swing wildly over the last decade, said Wilshire Vice President Russ Walker, who co-authored the report.
Local government retirement systems were 95 percent funded in fiscal 2001, then slipped as a recession took hold. They improved mid-decade only to fall again after the financial crisis of 2008 and the ensuing Great Recession, to close out 2011 about where they were in fiscal 2002, Walker said.
"We talked about the lost decade of the U.S. stock market, and now it looks like we see a decade that you might call a kind of lost decade in the funding ratios of our public pensions," he said.
The pension funds are also likely to return just 6.2 percent on investments in the next 10 years if asset allocations and other factors don't change, compared to the 7.75 percent median assumed rate of return, Wilshire predicted, noting that the pension funds themselves usually project return rates over a longer 20 to 30-year horizon.
Wilshire surveyed 106 large city and county retirement systems, including: Boston, New York City, Detroit, St. Louis and Los Angeles.
The Wilshire study is the latest to try to measure the scale of the nation's public pension problem, after years of underfunding and poor investment performance left many such systems at both state and local levels with big unfunded liabilities.
There are thousands of independent local public pension plans of all sizes in the United States, making it difficult to measure their overall health.
A June study from the National Conference of Public Employees Retirement Systems found that public pensions had funding ratios of 74.9 percent on average, down from 76.1 percent in 2011.
Also that month, the Pew Center on the States estimated that states were short $757 billion to pay retiree pension benefits in fiscal 2010. Pew also found that public pensions for 34 states were funded at less than 80 percent, although some have recovered slightly since fiscal 2010.
New accounting rules approved in June by the Governmental Accounting Standards Board will likely reveal that public pension funds are weaker financially than previously believed. Some changes take effect June 2013, with others to be implemented a year later.
(Reporting By Hilary Russ; Editing by Leslie Gevirtz)
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