State Treasurer James McIntire Releases Report on Pension Funding
September 27, 2010
Contact: Chris McGann 360-902-9033
OLYMPIA – State Treasurer James McIntire unveiled a new report on pension funding today highlighting Washington’s leadership on pension reform and the challenge we face in paying down the unfunded liabilities for Washington’s closed pension systems while continuing to keep its open, ongoing pension systems fully funded.
“Teachers, firefighters, police and other public employees earned their pensions over lifetime careers in public service,” McIntire said. “Their pensions must and will be paid – they are contractual obligations that cannot be avoided. Properly funding these systems now and consistently paying into them over time will keep the cost of providing these benefits to a minimum in the future.”
McIntire’s report expands on the analysis State Actuary Matthew Smith and the Select Committee on Pension Policy provided in the August 31 “2010 Risk Assessment: Moving Beyond Expectations.”
He points out that Washington’s pension system is, in many ways, the envy of most other states.
“Washington’s 10 ongoing pension plans – the plans that are open and accepting new employees – are funded at 118 percent of future liabilities. Washington led the nation in closing down its poorly funded, ‘California-style’ high benefit plans in 1977,” McIntire said in the report.
However, McIntire’s report also drives home the fact that Washington still has a pension funding problem because two of the three pension systems that were closed in 1977 have been historically underfunded – a problem that grows worse as the bills come due when these participants retire.
“Chronic underfunding of these two closed plans has caused an unfunded liability of $6.9 billion with the state on the hook for $3.8 billion and local governments for $3.1 billion.”
The report not only outlines the significant funding problems associated with these closed plans, it also dispels some of the misconceptions about Washington’s pension system. He points out:
- It’s not a Benefits Problem…”The average annual public pension is just under $20,500…Over 96 percent of retirees get annual benefits of $50,000 or less, only 112 people get benefits in excess of $100,000 per year.”
- It’s not an Investment Problem... “The State Investment Board’s Combined Trust Fund (CTF) investment returns since inception exceed 8 percent and its performance was among the top one percent of public pension funds in the country during the past 20 years.”
“The actuary’s report makes it clear – underfunding is the core issue and it may well be time for the Governor and Legislature to seriously consider amending the state Constitution with a funding plan,” McIntire said.
You can read McIntire’s full report at http://www.tre.wa.gov/