Many Pensions Still Struggling After the Great Recession

New Pew study finds many institutional investors are reporting declining funded ratios since 2009.

New research conducted by the Pew Charitable Trusts has found that many state and municipal pensions are reporting generally stagnant or decreasing funded levels following the Great Recession in 2009.

The study included 33 US cities with an eye for geographic diversity; not including more than two cities per state. The organization cited that “most cities recorded a decline in financial position [since 2009], however, cities in good financial shape heading into the Great Recession tended to emerge from it in similar condition while cities already undergoing financial distress experienced further declines.”

Pew’s analysis discovered an overall funding ratio decline amongst these pensions from 74% to 66%, and a 64% increase in overall pension debt, from $89 billion in 2009 to $147 billion in 2015. Some of the most significant declines during this period occurred in Phoenix (22%), Dallas (48%), Chicago (29%), and Milwaukee (21%). The four cities that were less than 50% funded in 2009—Charleston, Pittsburgh, Providence, and Omaha—continued to have funded ratios below 50%, with five other cities joining this funded ratio tier.

Total assets under management for the 33 cities increased by 12% but could not keep up with a 26% increase in liabilities. The study also found that the asset growth was largely congregated between five cities: New York, Los Angeles, San Francisco, Nashville, and Houston. Thirteen of the cities reported declining asset levels.

In contrast, a handful of cities showed significant improvements in their funded ratios thanks to a few key maneuvers outside of relying on investment returns. For example, Minneapolis witnessed a 10% increase due to merging the Minneapolis Employees Retirement Fund with the state-run Minnesota General Employees Fund. Atlanta passed reforms that increased employer contributions, reduced cost-of-living adjustments (COLAs), and moved the majority of new government employees into a distinct hybrid plan, subsequently raising its funded ratio by approximately 9%.

Pew recently released a pension report regarding Hawaii’s retirement system, noting that the island is ready to withstand a recession in the near future, due largely in part to increased contributions.

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Pew: Hawaii’s State Pension Ready to Withstand Recession


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