The state pension situation is improving, but most plan funding is still low

Wednesday, September 18, 2013

Wisconsin has the nation’s strongest pension plan, while Illinois has the worst, according to a new report. And the situation across states is starting to moderate.
On average, state pension plans are roughly 73 percent funded, according to Morningstar, an investor research company that puts together the annual report. While experts consider many factors, a funded ratio of 80 percent or better is considered to be a rough measure of a healthy plan. Funding ratios dropped last year, thanks to deferred losses from the economic downturn, but the situation is improving, the report’s author Rachel Barkley says.
“I would say it’s definitely moderating,” she said. “You’re not seeing the fast declines that you did a few years ago.”
Pensions are often among the largest obligations states have and play a critical role in determining fiscal health and credit quality. Despite the building economic recovery, state pensions weakened last year with their funded status dropping about 2 percent, due in part to deferred losses from the downturn, according to Morningstar.