As members of the baby boom generation age into retirement — approximately 10,000 Americans turn 65 every day — more and more are relying on pension benefits as their main source of income.
Public pension plans typically require employees to contribute a share of their salaries to a pool of funds that is invested on the employee’s behalf to be paid out to them in retirement. Teachers, firefighters, sanitation workers, and other public sector employees count on the various employment benefits of public sector work, including receiving in retirement a steady pension payout.
Mismanagement of the funds at the state and local levels as well as market volatility, however, may put pension benefits at risk for many workers entering retirement in the near future.
Every state has an underfunded pension. The smallest pension funding gap — the difference between a state’s pension assets and its retirement benefit obligations — sits at more than $335 million. Pension funding is largely a function of government policy, and failure by lawmakers to adequately manage risk, forecast return on investment, and budget for demographic changes can create large pension funding shortfalls.
To rank the severity of each state’s pension crisis, 24/7 Wall St. reviewed the average pension funding ratio — the market value of a pension fund as a share of the total benefits owed to current or retired public employees — for all 50 states as of 2016 with data from nongovernmental organization The Pew Charitable Trusts.
Correction: An earlier version of this story incorrectly expressed pension debts in billions and trillions. In fact, state-level pension debts range from the hundred millions to the hundred billions, and are reflected accurately in the current version of this story.