These public pension systems used to have too much money. Now they’re in crisis. What happened?
In 2001, some of the country’s biggest public pension systems were flush.
The plan serving Kentucky state workers, for example, was 125.8% funded, meaning it had 25.8% more money on hand to pay all of what it owed current retirees and workers expected to retire for the next 30 years.
But not even two decades later, Kentucky’s pensions, and some other previously over-funded plans, were in crisis. What happened?
In Kentucky, lawmakers approved extra benefits for plan participants — even making them retroactive. There and in other states, legislators decided to skip making necessary payments, freeing up budget money for tax cuts or other expenses. And in every city and state across the country, the financial crisis hit investments hard. At some point, a few careless decisions turned into a crisis.
In 2019, the Kentucky Employees Retirement System was only 16.5% funded, making it one of the worst-funded pension plans in the country, according to data from the Center on Retirement Research at Boston College.
As market returns remain strong, and most states and locals come through the coronavirus crisis much better than hoped, it may be tempting to view public pensions as home free. “Pension Worries Ease for States, Localities on Stimulus, Stocks,” blared a recent Bloomberg News headline.
Read more @Market Watch
694 views
