Moody’s: US State Pension Liabilities Spike to $1.3 Trillion in FY 2016

Illinois, Alaska, and Connecticut among largest unfunded liabilities.

State-funded US pension liabilities jumped 4.5% in fiscal 2016, increasing the total unfunded pension liabilities to $1.3 trillion, reported by Moody’s Investors Service Wednesday. It projected the liability will grow to $1.7 trillion in fiscal 2017.

According to Moody’s, the liability increase can be attributed to underperforming returns, low interest rates, and insufficient contributions to government worker retirement systems.

“About half the states are also not making sufficient payments to pension systems to prevent their unfunded liabilities from growing, even if investment targets are met,” Moody’s said in a statement.

According to Reuters, the $1.3 trillion fiscal unfunded liability accounted for 122% of state revenue.

Illinois had the biggest unfunded liability in fiscal 2016, equal to 487% of its revenue, followed by Alaska and Connecticut at 443% and 285% of their respective revenues. The median unfunded liability for all states was 82% of revenue.

The lowest pension liability was North Carolina at 23.6% of its revenue.

Moody’s projected the liability to grow to $1.7 trillion in fiscal 2017.

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