States Face Huge Funding Gap for Non-Pension Benefits

States owe public employees at least $2.73 trillion in pension, health care and other retirement benefits. And while they’ve set aside 85 percent of long-term pension costs, states have saved just 3 percent of funds needed for health care and other non-pension benefits, according to a new study by the Pew Charitable Trusts’ Center on the States.

The Pew study is a peek at the amount of non-pension benefits states owe employees, which—until a new ruling by the Governmental Accounting Standards Board—states have not had to disclose. Those numbers are expected to become public between December 2008 and March 2009.

“Now we know the magnitude of this bill—and paying it will require an enormous investment of taxpayer dollars,” says Susan Urahn, managing director of the Pew Center on the States.

Just six states—Arizona, North Dakota, Ohio, Oregon, Utah and Wisconsin—appeared to be able to fully fund their non-pension obligations for the next 30 years as of the end of fiscal 2006.

None of the five largest states—California, Texas, New York, Florida and Illinois—had put aside money for non-pension benefits as of fiscal year 2006. According to the Pew study, New York faces the largest liability, at $50 billion, followed by California at $48 billion, and Connecticut and New Jersey at $22 billion each.

Filed by Megan Johnston of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.