US - Public sector pension funds face a US$731bn funding gap over the next 30 years as the cost of pension promises, health care obligations and other related benefits have not been met by sufficient levels of saving at state level.
At present, the total average funding level to cover the obligations is about $2trn, or 85%, although the report states that this varies from state to state. The report also points out that this figure excludes pension benefit costs for the majority of teachers and local government workers.
The report states that over the past decade, only a third of states have consistently set aside the amount recommended by their actuaries to ensure costs are covered. A further 20 states had funding levels below 80%, considered to be an unhealthy rate.
Hawaii, Kentucky, New Jersey, Pennsylvania and Washington were single out as poor performers that have allowed pension funding to drop to "troubling" levels.
However, the report's authors praised the novel approaches taken by several states to reduce the funding burden, including the introduction of 'hybrid' pension plans incorporating elements of traditional defined benefit (DB) and 401(k) style defined contribution (DC) plans.
Susan Urahn, managing director of the Pew Centre on the States, which published the report, said: "Now we know the magnitude of this bill - and paying for it will require an enormous investment of tax payer dollars.
"For states that have dug themselves into a deep hole there are no quick and easy solutions, but there are fiscally responsible steps all states can take. These will take time, attention and above all, political will."
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