Research puts state in bottom ten for funding ratio/per capita liability
A recent report from State Budget Solutions, evaluating the unfunded liabilities of every US state found Hawaii in the bottom ten for both funding ratio and per capita liability, suggesting that the state may one day be forced to break the promise it made to its employees regarding their pensions and benefits.
Entitled Promises Made, Promises Broken, the survey of the growing pension crisis considered both the large scale and state-by-state implications of underfunded pension programs. Though Hawaii is not one the top ten states for total fair market valuation of unfunded liabilities, when the size and funding ratio of the state is taken into account, a more alarming picture develops. The funded ratio (which is a more accurate indication of the health of a state’s pension plan) in Hawaii is only 29%. Moreover, if the fair market value of the state’s total unfunded liabilities were viewed on a per capita basis, the average Hawaii citizen would be responsible for $21,852 (the seventh highest per capital share in the nation).
“Even by its own numbers, Hawaii’s Retirement System says it is only 60% funded,” stated Joe Luppino-Esposito, author of the study. “That is unacceptable. What’s worse is that when looking at the situation using a risk-free rate, Hawaii’s plan hits only 29%. That is a serious problem for both the retirees who were promised a pension, as well as Hawaii’s residents, who will see taxes rise and watch vital government services get cut.”
“The State of Hawaii has a responsibility to fulfill promises it has made to state employees and, at the same time, must stop making future promises it cannot keep,” stated Keli’i Akina, Ph.D., President of the Grassroot Institute of Hawaii. “While that’s a tough act, courageous leadership can make it happen. Specifically, lawmakers must ensure an airtight commitment to pay down current unfunded liabilities and at the same time raise revenues by measures that boost the economy and the prosperity of businesses and tax-payers. In addition, government and citizens need to accept the reality that state compensation and pension plans must be restructured based upon successful best-practices of other states and local governments.”