State Unfunded Pension Liability Goes Up $1.4 Billion
Thursday, April 14, 2011
The unfunded liability for the state pension system is $1.4 billion higher than previously thought, according to a new report presented yesterday to the state retirement board.
In all, the unfunded liability now stands at approximately $6.8 billion, up from about $5.3 billion.
As a result the amount of money the state will have to pour into the retirement system will soar to $621 million in fiscal year 2013—an increase of more than $150 million.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTOne of the biggest assumptions undergirding the change in the unfunded liability is the rate of return on investments. Previously, the state had assumed an 8.25 percent rate of return. Yesterday the state’s consultants—from the firm Gabriel Roeder Smith & Co.—recommended lowering the rate of return to 7.5 percent.
The retirement board yesterday voted to approve the recommended change in assumption.
Besides the change in investment returns, the other major change in assumption was in the mortality tables, which date back to 1994. According to the consultants there has been a “relatively large increase in the assumed life expectancy” of retirees.
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