Pension liability looms over U.S. states' economies

Wednesday, September 04, 2013

(Reuters) - Public pension liabilities in five U.S. states could represent more than 40 percent of their local economies, according to an analysis released on Tuesday by a conservative group that lowered the assumed rate of return for pensions' investments.

The group, State Budget Solutions, which aims to reform budgeting practices by state and local governments, used a rate of return that is less than half the historical averages that are used by most public pensions.

State Budget Solutions found retirement systems are short $4.1 trillion to pay future benefits in total, based on a projected rate of return on investments of 3.225 percent, which it said was the 15-year Treasury bond yield on August 21.