The report says wide gaps exist between the costs of these obligations and the assets states have set aside to cover them. Kil Huh is director of research at Pew.
“The 50 states have racked up a $3.3 trillion bill for retirement benefits over the next 30 years, but they’re a trillion dollars short of the funding to pay that bill. Over half of the trillion-dollar gap is money that states owe to retiree health care and most states have saved virtually nothing to cover those costs. But if this bill goes unattended to and is ignored year after year, as it has been in some states, the bill will only grow and grow. It’s like a credit card debt, you know, if you’re putting purchases on your credit card while not paying your bill, your debt is just going to balloon and over time it’s going to become unmanageable.”
Texas is doing better than other states with pension and retirement obligations.
“Across the board, states are 84 percent funded. States like Texas are faring fairly well, but states like New Jersey and Illinois are in poor shape. Illinois alone has only set aside about half of what it needs to pay for its pension benefits and has saved very little towards its retiree healthcare bill. Texas is funded over 90 percent and it has historically met its pension bill, but has fallen short in recent years. And that’s helped open up a gap in Texas of $13 billion.”
Solving the funding gap is a problem for each individual state. The report says reforms are needed to counteract a decade of inaction and declining assets.