U.S. states’ deficits in their employee retirement systems widened by 26 percent in fiscal 2009 as governments were stung by investment losses and failed to pay enough into their pension funds, a study found.
The deficits, or the difference between the retirement and health-care benefits states have promised their employees and the assets set aside to fund them, grew to $1.26 trillion by the end of the 2009 budget year from $1 trillion a year earlier, the Pew Center on the States said in a report released today. The fiscal year ends in June for all but four states.
The gaps are straining governments that have yet to fully recover from the recession and are stoking political fights in states such as New Jersey, Ohio and Wisconsin over the workers’ benefits. They have also drawn scrutiny in Congress, where Republicans have held hearings into the risks posed by underfunded pensions and backed legislation that would bar the federal government from bailing out any ailing funds.
“The states dug themselves a big hole before the recession ever hit,” Susan Urahn, the managing director of the Pew Center in Washington, said in a conference call with reporters yesterday. “We can see how the Great Recession and states’ severe budget problems made a serious problem even worse.”
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