The States with the Largest Unfunded Pension Liabilities

Pensions have largely disappeared from the private sector, and while many public sector workers have pensions, many states are chronically under-funding their pension funds, leading to tough conversations about cutting benefits or raising taxes. These 10 states have the largest looming unfunded pension liabilities.

There’s no question that the way people fund—and define—retirement has changed significantly in recent decades. For one thing, fewer people expect to stop working completely when they reach 65. Instead, many plan to simply decrease their work hours, as they ease into retirement.

Another change has to do with the sources of retirement income. Americans are becoming more dependent on Social Security, and many are falling behind in their own retirement savings. Meanwhile, pensions, once a primary source of retirement income for a significant percentage of Americans, have been disappearing rapidly.

In just 20 years, from 1990 to 2010, the number of Americans working in private industry who had a pension dropped from 42% to 22%, according to the US Bureau of Labor Statistics. Meanwhile, the bureau says about 86% of public-sector workers have pensions. However, those pensions may be more theoretical than actual.

To wit, research unveiled in November by the think tank State Budget Solutions found state pension plans were under-funded to the tune of $4.7 trillion, up from $4.1 trillion in 2013. Put another way, the combined state plans are only funded at 36% of the level they need.

The chronic problem could affect even people who aren’t public employees. That’s because pension obligations could cause state legislatures to raise taxes or cut funding to other programs, such as charity care reimbursements and public health programs.

For instance, in New Jersey, Gov. Chris Christie is warning that the only way to fully fund the state’s pension would be to raise taxes. A spokesman for the governor told the Philadelphia Inquirer in April that the state would need to raise the income tax by 29% or the sales tax by 10% in order to make the state’s full pension payment.

Other states, including Pennsylvania and Illinois, have held high-profile political battles over their pension plans, with some states proposing major changes or cuts.

Wisconsin is in the best shape of any state—by far—but even that state’s pension fund iss only 67% funded. At the other end of the spectrum are these 10 states, based on analysis from State Budget Solutions. The states are ranked by the percentage of their pension liability each state has met. Also included is their unfunded liability in dollar amount (based on a fair market valuation), the liability amount per capita, and a comparison of the unfunded liability to the state’s gross state product in 2013.

Percentage of Pension Liabilities Met: 29%

Unfunded Liability: $8.8 billion

Unfunded Liability per Resident: $12,192

Unfunded Liability as Percentage of Gross State Product: 16%

9. Massachusetts

Percentage of Pension Liabilities Met: 29%

Unfunded Liability: $104 billion

Unfunded Liability per Resident: $15,545

Unfunded Liability as Percentage of Gross State Product: 23%

8. Hawaii

Percentage of Pension Liabilities Met: 29%

Unfunded Liability: $30.7 billion

Unfunded Liability per Resident: $21,852

Unfunded Liability as Percentage of Gross State Product: 41%

7. New Hampshire

Percentage of Pension Liabilities Met: 28%

Unfunded Liability: $15.9 billion

Unfunded Liability per Resident: $12,026

Unfunded Liability as Percentage of Gross State Product: 23%

6. Kansas

Percentage of Pension Liabilities Met: 28%

Unfunded Liability: $36.9 billion

Unfunded Liability per Resident: $12,762

Unfunded Liability as Percentage of Gross State Product: 26%

5. Mississippi

Percentage of Pension Liabilities Met: 27%

Unfunded Liability: $55.9 billion

Unfunded Liability per Resident: $18,722

Unfunded Liability as Percentage of Gross State Product: 53%

4. Alaska

Percentage of Pension Liabilities Met: 25%

Unfunded Liability: $29.9 billion

Unfunded Liability per Resident: $40,639

Unfunded Liability as Percentage of Gross State Product: 50%

3. Kentucky

Percentage of Pension Liabilities Met: 24%

Unfunded Liability: $83.4 billion

Unfunded Liability per Resident: $18,976

Unfunded Liability as Percentage of Gross State Product: 45%

2. Connecticut

Percentage of Pension Liabilities Met: 23%

Unfunded Liability: $86.6 billion

Unfunded Liability per Resident: $24,080

Unfunded Liability as Percentage of Gross State Product: 35%

1. Illinois

Percentage of Pension Liabilities Met: 22%

Unfunded Liability: $331.6 billion

Unfunded Liability per Resident: $25,740

Unfunded Liability as Percentage of Gross State Product: 46%