October 15, 2015 / 12:31 PM / in 4 years

U.S. public pensions little improved since recession -Fitch

Oct 15 (Reuters) - The health of state-run U.S. public pension funds has barely improved since pre-recession highs, according to a Fitch Ratings report on Thursday.

The median funded ratio for state retirement systems was 71.5 percent in 2014, “nearly unchanged” from the previous year, Fitch found. The median ratio reached a high of 84.7 percent in 2007 and fell to a low of 68.9 percent in 2012.

The ratio fell as severe market declines cut into the funds’ asset valuations, Fitch said.

“Several years of strong market gains through 2014 offset remaining market declines and steadily rising liabilities, thus lifting reported funded ratios slightly, but they remain well below prerecession highs,” Fitch noted in the report.

Illinois is at the bottom of the pack - not a surprise for the lowest rated U.S. state, whose pension problems are well known. Its $119 billion of unfunded pension liabilities, as calculated by Fitch, amounts to 19.4 percent of personal income, compared with a median level of 3.3 percent for all states. Fitch uses the overall personal income levels in each state to show how large a burden the liabilities are for taxpayers.

Kentucky is the second worst: its more than $26 billion of unfunded liabilities are 16.2 percent of personal income.

When state debt levels are combined with unfunded pension liabilities, Connecticut ranks 49th at 23.2 percent of personal income, behind only Illinois.

States have gotten slightly better at funding their pensions for public workers, however.

In fiscal 2014, fifty-three percent of major statewide retirement systems received 100 percent or more of their actuarially required annual contribution.

That’s up from 42 percent in fiscal 2011, the post-recession low point, when severe budget pressure prompted many states to reduce pension funding, Fitch said. (Reporting by Hilary Russ in New York; Editing by Steve Orlofsky)

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