Tuesday, April 26, 2011

Updated Study Finds That Wisconsin Has One of the Best Financed Public Pension Plans

Wisconsin Ranks Second Highest in New Pew Report

A study released today by the Pew Center on States reinforces the conclusion of earlier analyses that Wisconsin has been one of the most fiscally responsible states in financing its public sector pension fund. According to the Pew report, a well-funded pension system should have set aside funding for at least 80 percent of its pension liability, and 31 states fall short of that threshold. However, Wisconsin is one of two states that have fully funded estimated liabilities. (New York State is at 101% and Wisconsin at 100%.)

The new study by Pew underscores the points we made in a short report we issued last week: Wisconsin’s Fiscal Challenges and Strengths: How Do We Compare? That paper examines Wisconsin’s ratings on a number of different measures, many of which paint a very different picture of Wisconsin’s fiscal health than the images of a state in fiscal crisis that have been painted in the minds of many people across the country.

The Pew report, which updates one released a year ago, is titled The Widening Gap: The Great Recession’s Impact on State Pension and Retiree Health Care Costs. As that title suggests, the report contends that the underfunding of pension funds has grown worse over the last year. However, a blog post today by the Center on Budget and Policy Priorities (CBPP) makes the case that state pensions are in better shape than the Pew report suggests. Liz McNichol of CBPP notes that the Pew report, “gives a snapshot of pension funds two years ago, when they were still reeling from the effects of the 2008 stock market crash.” McNichol agrees that some pension systems are underfunded ("in some states seriously so"), but she says “the Pew report doesn’t account for the stock market’s improvement over the past two years, or the recent pension reforms in many states.”

The CBPP critique of the report will be of considerable interest to people in states where the pension fund has been underfunded, at least before the stock market rebounded. However, the more salient fact for people in Wisconsin is that our state has one of the best funded public pension funds in the U.S.

Jon Peacock

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