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Interactive Map Of Pension Liability By State And City

Terms used in this map:

Reported Value of Unfunded Liabilities: States and local pension systems report both the assets and liabilities in their pension funds. Their estimate of unfunded liabilities is calculated using the discount rates they have chosen to use as their average expected return on investments.

Market Value of Unfunded Liabilities: This number represents the unfunded liabilities accrued if using a risk-free discount rate on pensions promises. The market value of unfunded pension liabilities is comparable to government debt, owed to current and former public employees as opposed to capital markets. As a result, it should be calculated using discount rates that reflect its certainty of payout.

Unfunded Liability Per Person: This number uses the market value of unfunded liabilities and divides it by the population in the state or city.

Percent of Own Revenue Contributed: Total government contributions to pension plans divided by the total general revenue from own sources for all state and local government entities. This number represents how much governments contributed to pension plans.

Required Contribution to Maintain Existing Liability: This number represents how much governments should have contributed in order to prevent the market value of pension liabilities from rising. Contributing at this level would not have reduced their unfunded liabilities.


Other helpful terms:

Pension – A retirement program where a worker and an employer contribute funds during an individual’s working years in order to provide a steady stream of income during that worker’s retirement.

Defined Contribution Plan – An investment fund where employees and/or employers contribute a fixed amount of money during employment. There is no guaranteed payout during retirement. Instead, the total investment balance is owned by the employee to use during retirement or to pass on to family. The employee is responsible for their own retirement savings and reaps the benefits/losses of their investment returns.

Defined Benefit Pension – An investment fund where employees and/or employers contribute funds during employment. Upon retirement, the employees are promised a fixed payout for the rest of their lives. It is the employer’s responsibility to account for the retirement needs of its employees, as well as the ups and downs of investment returns.

Underfunded Pension - A defined benefit pension plan that does not have enough assets and income to pay out the benefits that it is obligated to pay. Underfunding happens when companies or governments fail to contribute enough funds to pay out promised benefits, or when expected investment returns do not materialized.

Expected Return – Pension funds have to estimate long-term expected returns on their investments in order to plan for future benefit payouts. This estimation is used to determine the total liability the employer will owe in the future. The total liability is then used to determine the necessary amount of annual contribution to keep the pension fully funded.

Liability-Weighted Average Expected Return – The mean of all expected returns weighted by the size of each pension’s liability. Average expected returns are calculated this way to avoid smaller pension systems gaining the same influence on the average as larger ones.

Market Value of the Liability (MVL) – The total liability recalculated using a zero-coupon Treasury yield curve instead of the stated discount rate/long-term expected return. This expresses the liability to be much higher, but generates results that are based on more stable and less ambitious assumptions.

Unfunded Market Value Liability (UMLV) – The recalculated market value liability minus the stated market value of assets. This works as a replacement for the stated unfunded actuarially accrued liability (UAAL).

Risk-Free Discounting – Calculating future liabilities using the investment returns associated with no risk. Since it is actually impossible to invest with zero risk, returns on U.S. Treasury bills are used as the closest representation.

Multiple of Estimated Total Own Revenues is one of the two measure of revenues used to detail financial information on state and local government finances. It includes all revenue sources but excludes the “insurance trust” revenues reflecting the returns of pension funds themselves and intergovernmental revenues, which are transfers from the federal government to lower form of government, as well as transfers from state governments to local governments.

Multiple of Estimated Tax Revenues is the second measure of revenues used to detail financial information on state and local government finances. It only includes the tax revenues and exclude fees and charges, most of which are for services rendered. The idea here is to consider how state and local governments could pay for unfunded pensions through traditional taxation sources like income taxes, sales taxes, and property taxes.

Funding Ratio – The ratio of total pension assets divided by total pension liabilities. A ratio of 100% denotes a fully funded pension. Anything under 100% represents an underfunded pension.

Duration-Matched Treasury Yield – The return on U.S. Treasury bills over a set period of time. This number is used to  represent the expected return of investing in risk-free assets and involves the minimum amount of risk possible in an investment portfolio that matches the time frame of pension obligations.

GASB - Governmental Accounting Standards Board is an independent, non-profit, non-governmental regulatory body charged with setting authoritative standards of accounting and financial reporting for state and local governments. It requires state and local government to report on the assets and liabilities of their systems in a uniformed format.

Statements No. 67 and 68 change and standardize the way liabilities for pensions are calculated and require employers and the state (as a non-employer contributing entity) to recognize a portion of the liability in their financial statements. For more information, click here.

Private equity – A source of investment capital from high net worth individuals and institutions for the purpose of investing and acquiring equity ownership in companies. 

Intergovernmental revenue - Consists of monies relocated from one level of government to another, or involved transfers within government in order to provide needed funds.

Liability – A government, company, or individual’s financial obligations to others.

Market value – The value of a company according to the stock market. It is calculated by multiplying a company's shares outstanding by its current market price. 

Pension deficit - The gap between how much a pension is required to pay out versus how much money is available to pay out.

Actuarial Assumptions – Multiple assumed factors used to calculate the future liabilities of a pension. Predictions on lifespans, salary increases, inflation, and investment growth all go into the formula to determine the true size of a liability.

Discount Rate – The expected rate of return on investments that is used to calculate the value of future liabilities. A higher discount rate assumes a high return on investments and results in a lower calculated future liability. A lower discount rate assumes lower returns, which renders a higher amount for a future liability.

Employer/Employee Contribution – The annual amount contributed to the pension fund by the employer or the employee. These amounts are usually determined by actuarial valuations that predict the value of future liabilities.