COLUMBUS — America’s public pension funding problem is only getting worse as states fail to set aside enough money to cover retirement checks and health care for retirees, according to report from the Pew Center on the States.
In fiscal year 2010, the gap between states’ assets and their obligations for public sector pensions hit $1.38 trillion, up nearly 9 percent from the previous year. Of the $1.38 trillion, $757 billion was for promised pension benefits and $627 billion was for retiree health care coverage.
Ohio received low marks for pension funding but high marks for retiree health care funding, according to the report. Overall in fiscal year 2010, 67 percent of the pension liabilities were funded and 32 percent of the health care costs were funded, the Pew Center found.
Although 32 percent funding for health care sounds low, it’s way above the 8 percent national average, the center said. The center said 80 percent funding level for pension obligations is regarded as sound.
Ohio’s pension officials took issue with how the report portrayed them because it lumps all the systems together and uses 2-year-old data. And Pew said in 2009 that Ohio was a “solid performer” with a 66 percent funding rate but now the systems are funded at 67 percent but got slapped with a “serious concerns” rating.
“We believe it does not reflect the current status of funding,” said Mike Pramik, spokesman for Ohio Public Employees Retirement Fund, the largest of the five state-employee funds.
Ohio’s five pension systems are:
• Public Employees Retirement System,
• State Teachers Retirement System,
• Schools Employees Retirement System (nonteachers),
• Ohio Police and Fire Pension Fund,
• Highway Patrol Retirement System.
All five systems are awaiting action on reforms pending before the Ohio House that would help shore up their finances by requiring employees to work more years, retire later and accept a smaller benefit. None of the reforms call on taxpayers to contribute more to the pension systems in Ohio.
Ohio’s pension systems need legislative approval before they can implement the changes to benefits and employee contribution rates.
According to the National Conference of State Legislatures, 49 states have already adopted reforms since 2009.
Ohio’s public pension systems cover 1.7 million current and former government employees and hold more than $165 billion in assets. The pension benefits are guaranteed, regardless of investment gains or losses. Health care coverage is not mandated by law but many state officials regard it as a promised benefit.
Nick Treneff, spokesman for STRS, said the Pew report’s 2-year-old data doesn’t reflect more recent investment gains and changes in the retiree health care plan.
Nonetheless, STRS is still underfunded, he said.
“It underscores the need to enact the board-approved plan design changes now pending in the Legislature,” Treneff said.
Ohio Police & Fire Pension Fund Executive Director Bill Estabrook echoed those comments.
“OP&F has recognized that our long-term funding model needs changed,” Estabrook said. “This is why we have been advocating changes for the last several years.
“With the introduction of Senate Bill 340, we are pleased that the Ohio Senate has taken action.
“We encourage the House to do the same so we can address this issue sooner rather than later,” he said.