States With the Best Retirement Funding
State governments spent close to $39 billion, or about $120 per capita, on retirement funding in 2015. For decades, the funding and distribution of pension funds for state government employees has been a contentious issue. State pension liabilities can strain overall state finances, especially when the economy is already struggling, and even put funding of other programs at risk.
Unlike the vast majority of private sector workers, most state government employees are guaranteed a steady income when they retire. Both the employee and the government contribute to a retirement plan, which is then invested in the market.When the employees retire, they receive a fixed amount over their remaining lifetime — whether the contributions have been enough to cover this amount or not. Meanwhile, just 19% of private sector workers have a similar pension program.
The responsibility of collecting funds and paying the pensions falls to state and local governments, and these governments spend millions each year in regular payments and lump sums to the beneficiaries — the retired employees and their families. About 80% of state spending on retirement programs last year was part of regular payments to former employees. The remainder was in the form of lump sums paid to relatives of employees, as well as expenses.
24/7 Wall St. reviewed per-capita state government retirement funding expenditure figures from the U.S. Census Bureau’s 2015 State and Local Government Expenditures data. States with high pension expenditures tend to have higher tax collections per capita, and the size of the state government workforce does not appear to be a major factor in annual state pension payments. Our list is ranked in order from the lowest per-capita state retirement fund expenditure to the highest.