State Pension Funds Come Up $1.26T Short

Market losses, aging population leave funds in dire straits
By Kevin Spak,  Newser Staff
Posted Apr 26, 2011 10:00 AM CDT
Protesters march up the street toward the Keep the Promise pension rally in Maryland last month.   (AP Photo/Nick Wass)
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(Newser) – States' pension and health care funds had a disastrous year in 2009, saving a whopping $1.26 trillion less than they’ll need to pay the retirement benefits they’ve promised to their workers, according to a new study from the Pew Center on the States. Part of the problem is that market losses related to the financial crisis savaged funds across the country, but states also just aren’t contributing enough to their funds to deal with their aging workforces, the Washington Post explains.

The $1.26 trillion figure may even prove to be optimistic; Pew went along with states’ assumptions that their pension funds would return roughly 8% a year. When calculated using the standards that private firms are required to use, the shortfall balloons to $1.8 trillion. Rising markets should improve things, however, and some union leaders say the problem is being overstated. “These funds are not only persevering, but are well on their way to recovery,” says one union leader.

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