As Exhibit 2 demonstrates, however, when one combines the plan's
unfunded liability (benefits have continued to increase in contract settlements) with outstanding pension bonds, no progress has been made.
Since these plans are run according to different formulas, there's no single figure to measure their total
unfunded liability. There's evidence that the situation has improved since the seventies when Hamtramck, Michigan went bankrupt over pension debts - and when pension debts helped push New York City to the brink of financial collapse.
Even though agencies are paying exponentially more into PERS, that's still not nearly enough to knock down the
unfunded liability - the projected long-term payouts PERS must make to government retirees.
Along with the annual payment toward the
unfunded liability, the state also has to pay the annual cost of pensions earned in that year.
City Auditor James DelSignore said Worcester, which began its pension system in 1945 and has accrued
unfunded liability since "day one," now has $300 million in
unfunded liability.
At first, local governments found that they could make their annual pension payments directly from tax revenues, but, as the pension liability grew, the result was a huge
unfunded liability which threatened the financial stability of many of the state's large and small municipalities.
Scaling back the assumed rate of return by nearly three-quarters of a percentage point would add $6 billion to the
unfunded liability of PERS.
Worcester, for example, has an
unfunded liability to retirees estimated at $765.3 million.
The debt and
unfunded liability numbers for each state are stated separately on total dollar and per capita basis.
Returns on investments of 14.3 percent in 2012 and 15.6 percent in 2013 cut $4.5 billion to $5 billion from the
unfunded liability. The Legislature also reduced PERS benefits last year, mainly by limiting annual cost-of-living increases, which shrank the shortfall by an additional $5 billion.
