Stanford: Public Pension Debt Jumps 84%, to $4.8 trillion

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The latest report from the Stanford Institute for Economic Policy Research has revealed that the public pension debt for the 50 states and the District of Columbia jumped 84 percent in recent years, from $2.625 trillion in 2008 to $4.833 trillion in 2014.

Joe Nation, Ph.D. leads a distinguished group of Stanford University faculty, including Nobel Prize winner William F. Sharpe, who compile and analyze the actuarial, budgetary, demographic, and other financial data necessary to calculate U.S. public pension plan liabilities.

The SIEPR “Pension Tracker” site is especially illuminating, because the researchers calculate pension liabilities on a “market basis,” to understand how many dollars taxpayers need to invest in 20-year Treasury bonds at a fixed rate today to have enough money to pay their pension debt, and on an “actuarial basis,” at a much higher estimated investment return, to pay off employee pension obligations in the future.

Pension Tracker estimates the total public pension debt on a “market basis,” where all monies are invested in safe 20-year maturity Treasury bonds offering a constant yield of 2.18 percent, at about $41,219 per household, or about $15,037 per person.

Pension Tracker estimates that the total public pension debt on an “actuarial basis,” with an estimated variable future investment return, is $8,872 per household and $3,231 per person.

Pension Tracker also finds a disproportionate impact on the “average” pension debt calculations due to the extraordinarily large impact of the “market based” pension debt per household for three states — Alaska, Illinois and California:

1) Alaska $113,137
2) Illinois $77,822
3) California $77,700

According to SIEPR, “The highest pension debt/household is in Alaska, with an estimated $113,137 figure; Illinois and California are in the second and third highest rankings at more than $77,000 per household.” The lowest state pension debt per household is in Tennessee at $17,761.

Illinois has the lowest “market funded ratio” (value of pension assets divided by market liability), at 23.3 percent. The other 49 U.S. states and Washington, D.C. have a market funded ratio that is almost twice as high, at 41.4 percent.

Despite over $8 trillion in federal deficit spending flowing to the states in the 6 years from 2008 to 2014, the Stanford Institute for Economic Policy Research report demonstrates that due to increasingly underfunded public employee pensions, the financial solvency for most states has declined substantially during the period.


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