BATON ROUGE (The Center Square) — A new report shows that Louisiana is in the middle of the pack nationally for the health of its public retirement program, ranking 28th for risk-free unfunded liabilities.
The American Legislative Exchange Council recently released its sixth annual report on the solvency of state defined benefit pension plans entitled “Unaccountable and Unfunded”, authored by ALEC policy analyst Nicholas Stark, the director of research Thomas Savidge, Chief Economist Jonathan Williams and Lee Schalk, Vice President of ALEC Policy.
The report shows that Louisiana ranks 28th nationally with risk-free unfunded liabilities of $128 billion, calculated using a US Treasury-based risk-free discount rate of 1.13% and a fixed discount rate of 4.5%.
The discount rate is used to determine the value of the liabilities that public pension funds will have to pay in the coming decades, and the ALEC rates used for the calculation are well below the expected discount assess for the Louisiana State Employees Retirement System from 7.4%, which is expected to drop to 7.25% next month.
The ALEC report ranked Louisiana 37th nationally in unfunded liabilities per capita at $27,657.45, more than three times the best state of Tennessee at $8,511.92 and over $15,000. below the worst state, Alaska, at $42,829.02.
Louisiana ranks similarly on the LASERS funded ratio — a measure of plan assets to liabilities — with a 33rd place finish of 27.97%, according to ALEC.
The Pelican State’s best measure derives from the change in funding ratios between 2012 and 2020, using the fixed discount rate of 4.5% to account for changes in the risk-free discount rate. Louisiana’s funded ratio of 24.93% ranked sixth nationally, surpassed only by Ohio, Nebraska, Arkansas, West Virginia and Alaska.
New Jersey had the worst change in funded ratio at -27.48%.
Data from LASERS shows the system pays out $1.3 billion in annual benefits to 93,142 members. The system reports a market value of assets as of June 30, 2021 of $14.7 billion, with unfunded liabilities of just under $7 billion.
The ALEC report found that the state’s unfunded pension liabilities amounted to $8.28 trillion nationwide, or just under $25,000 for every man, woman and child. in the USA.
“This is an unprecedented amount in the history of this report, but most of the change is the result of a decrease in the risk-free discount rate, caused by lower Treasury bond yields. American,” according to the report.
Total unfunded liabilities increased by $2.45 trillion in the 2021 report as the risk-free discount rate fell from 2.34% to 1.13%, “partly due to interest rates historic lows that depress Treasury yields and significantly increase the present value of liabilities,” according to the document.
Vermont, the nation’s top-ranked state for risk-free unfunded liabilities, has total unfunded pension liabilities of about $14.4 billion, while the worst-ranked, California, exceeds $1.5 trillion. dollars of total unfunded pension liability.
“If private sector CEOs and CFOs signed off on financial statements with the accounting used by state and local governments, they would be in jail,” said Jonathan Williams, ALEC’s executive vice president of policy. “It’s the kind of Enron-style accounting, unfortunately, that’s been going on for far too long in state and local governments. And so our report goes through some of the bad accounting and really gives an apples-to-apples comparison of how whose states fund, or in many cases unfortunately do not fund, pension obligations.