Pew Trust: State Pension Managers Failed Even To Meet Own Funding Estimates

A cascade of failures leave taxpayers on hook for $26.7 billion in unfunded pension promises

When the state of Michigan made its contributions to the public school employees pension system in 2014, the amount wasn't even enough to prevent the system from going even further into debt. Instead, the deposit was $560 million short of what was needed just to stay even.

The shortfall is among the findings of a report from the Pew Charitable Trusts, a Washington, D.C., nonprofit, in a report released in August.

This report sheds some light on how state officials have allowed a $26.7 billion unfunded liability to accumulate on the balance sheet of the Michigan Public School Employees Retirement System. Catching up on this underfunding is increasingly squeezing school budgets across the state.

The Pew report found that the state had calculated it should pay $2.223 billion in 2014. Of this, $317 million was for new pension promises made to school employees during the past year.

The remainder — $1.906 billion — was to catch up on $24 billion worth of underfunding plus assumed growth projections. In other words, the gap between how much the system has and how much it should have.

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The state instead paid a total $1.663 billion that year, falling short of the "stay even" amount by $560 million. It thus failed to pay what its own actuaries said was required to avoid sending the pension plan even deeper into the hole. While this story is the failure of only a single year, it is one of many such failures that add up to the current unfunded liability of $26.7 million.

Caleb Buhs, spokesman for the Office of Retirement Services, didn't respond to an email seeking comment.

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