10 Worst-Off State Pension Funds

Fiscal watchdogs such as the conservative Bluegrass Institute have pointed out that the problems inherent in having an unfunded liability that is 234% of payroll are even more staggering considering that as recently as 2001, these plans were very well funded, at 110%. Fueling the funding decline has been a lack of funding cost-of-living increases.

Oklahoma

When it comes to funding its pension obligations, Oklahoma has long been one of the worst states.

The Pew Center on the States has ranked it in the bottom five in the nation, with a 57%. The state has roughly $16 billion in unfunded liabilities, a $10 billion spike over a decade blamed on benefits that increased without offsetting deposits.

With crisis there may be opportunity, however. In recent months, state officials have looked aggressively at improving the funding of its pensions. The retirement age for new employees has been raised and cost-of-living benefits, for the first time, can not be awarded without allocated funding.

Already, $5.5 million has been shaved from liabilities and even the Oklahoma Teachers Retirement System, considered one of the worst-managed funds in the state, could be fully funded within 20 years.

Kansas

Fiscal conservatives have seized upon the Kansas Public Employees Retirement System as a poster child for budget-busting benefits.

Officially, the KPERS unfunded liability stands at $8.3 billion, but "the real deficit" according to the Kansas Policy Institute, a conservative think tank, is "more likely to be at least $14 billion" and possibly as high as $20 billion. The sweep of estimates is because the official statistic is based on assets earning an 8% annual return over the next 30 years. Critics say that the investment return should be set much lower and, for example, a 6% investment return would require an additional $3.3 billion in state contributions over 10 years.

Among the reforms being considered is to put new employees and nonvested current employees into a 401(k)-style retirement plan.