- Post 22 June 2012
- By Copy Editor
Maryland has one of the worst-funded pension systems in the country, with its retirement and health liabilities growing to $71 billion, after lawmakers paid less into the system than what was owed for years, according to a new report.
The state's funding level ranked worse than just 11 other states in 2010, as Maryland had paid only 64 percent of what it owed to retirees in pension benefits, according to a newly released report from the Pew Center on the States. The system's liabilities increased $2 billion from the previous year.
By comparison, Virginia's pension funding level ranked in line with the national average, at 72 percent.
Economists say a healthy pension system should be about 80 percent funded.
The Pew Center rated both Virginia and Maryland's stewardship of their pension systems as "cause for serious concern."
"These states cannot sit back and hope the stock market bails them out, especially as baby boomers retire," said David Draine, a senior researcher with the Pew Center. Critics say the states also are banking on projections for their investment returns that are much too rosy.
Maryland and Virginia also have been underpaying retiree health care benefits, with Maryland having paid just 1 percent of what it owed in retiree health costs in 2010, compared with the national average of 8 percent. Virginia's retiree health care costs were 26 percent funded, by comparison.
The gap between states' assets and their liabilities for public-sector retirement benefits grew by $1.38 trillion in fiscal 2010, up 9 percent from the previous year, according to the report. While most states have enough cash to cover benefits in the short term, many ultimately will need "higher contributions from taxpayers and employees, deep benefit cuts, and, in some cases, changes in how retirement plans are structured and benefits are distributed" to compensate for serial underfunding, the report said. ...continues...