Tuesday, June 29, 2021

Tennessee's state pension system among the nation's most sound

By Jon Styf | The Center Square  - Tennessee has the healthiest state public pension system in the country based on the amount of unfunded liability per capita, according to a new report from the American Legislative Executive Council. 

Tennessee taxpayers owe $6,345.77 per capita as opposed to the state with the highest per capita pension liability, Alaska, at nearly $43,000 per capita. Tennessee's total unfunded pension liability was $43.3 billion, the 15th-lowest in the country. 

The report found that $5.82 trillion, or $17,748 per person, is owed by “every man, woman and child in the United States.” The report found the 10 states with the largest liabilities are growing quickly and make up 58% of the total liability in the country. 

“In Tennessee, we have worked hard to maintain one of the nation’s best-funded pension systems,” Tennessee state Rep. Susan Lynn, R-Mount Juliet, said. “Our efforts on behalf of taxpayers will continue, and we are proud to be recognized in the latest edition of ALEC’s report for our commitment to sound pension policies.” 

Tennessee lawmakers voted to allocate $250 million to the state’s pension system in the next fiscal year budget, which starts Thursday, and made several cuts to Gov. Bill Lee’s proposed budget to make that happen. 

Rep. William Lamberth, R-Portland, said during budget discussions the state had a lot to be proud of in its handling of its pension system. “We are going to make good on our promises,” he said about the $250 million investment. 

Pensions throughout the U.S. were hurt over the past two years. Investments of those funds fell short of expectation with a 6.5% return during fiscal year 2019 instead of the assumed 7.2% return, the report said. 

Tennessee ranked fifth in the report's funding ratio rankings, which examined the health of a pension plan by looking at the ratio between assets and liabilities, expressed as a percentage. Wisconsin led the way with a 64.27% funding ratio while Tennessee was at 47.86%. Connecticut ranked last at 23.87%.

“Unfunded public pension liabilities represent a massive risk for state taxpayers, as well as state workers and retirees,” ALEC Chief Economist and Executive Vice President of Policy Jonathan Williams said. “Fortunately, states like Wisconsin, Michigan, Tennessee and Oklahoma have all enacted pension reforms in recent years that will ensure promises to workers and retirees are honored, provide flexibility for young workers and protect hardworking taxpayers.” 

Tennessee also ranked at the top in the unfunded liabilities as a percentage of gross state product at 11.4%, ahead of Indiana (14.03%) and Nebraska (15.03%), which also finished second and third, respectively, behind Tennessee in lowest per capita pension liability. 

South Dakota ($10.2 billion), Vermont ($10.2 billion) and North Dakota ($12 billion) had the lowest unfunded pension liabilities in the U.S. 

California ($894.7 billion), Illinois ($405.2 billion) and Texas ($401.5 billion) had the highest unfunded pension liabilities in the country.

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