(Reuters) — The funding gap for state public employee retirement in the United States benefits climbed by US$120 billion to US$1.38 trillion in fiscal 2010, according to a recent report.
The report comes at a time when many voters and politicians already claim that compensation for public employees is bloated.
The Pew Center on the States said that public pension systems in 34 states were funded at less than the 80 per cent level that is considered the threshold for a healthy pension. That's in stark contrast to 2000, when more than one-half of the states' pension plans were 100 per cent funded.
"The larger (the shortfalls) are, the higher the cost for taxpayers today and for many years to come," said David Draine, a Pew senior researcher, who compared many states to credit card holders who hadn't paid their bills in full but kept racking up charges.
Since 2009, the dire lack of funding has led at least 43 states to enact some reforms, many of which may not go far enough. Reforms passed after 2010 were too recent to be reflected in the new study, the Pew Center said.
The 2010 pension data was the most current that Pew said it could gather from all 50 states. For most states, the fiscal 2010 year ended on June 30, 2010.
The study comes as members of AFSCME, the largest public employees union, elect a new president to chart the union's course during the current rocky times. One candidate, Danny Donohue, said he has never seen such skepticism toward public employees in the 30 years he has been in the American Federation of State, County and Municipal Employees.
For years, many states and local governments underfunded pensions and other benefits for retirees, particularly health care. During the 2007-09 recession some cut contributions further to deal with shrinking revenue.
New Jersey, for example, failed to consistently make full required payments to its pension plan in previous years, Draine said. Now its annual required contribution to close the gap for its pension fund is at least US$2 billion more than neighbouring New York, even though New York's pension plan is larger.
"Back when the market was going like blazes, people didn't put money into pensions," said Donohue, who also heads the union's New York branch. "Just like anything, there was a day of reckoning."
Pension systems could see further strains. The baby boomer generation could swell the ranks of retirees drawing benefits, at the same time that public employees, who provide about 10 per cent of pension fund revenue, are losing their jobs.
In fiscal year 2010, the gap in public pension funding rose by nearlyUS $100 billion to US$757 billion, with the shortfall in retiree health-care benefits increasing by more than US$20 billion to US$627 billion, Pew found.
The Pew Center provides the most widely cited estimate of the gap between how much money public pension and retiree health-care funds have and how much they must pay in future benefits.