GAO Finds State and Local Pension Systems Are Well Funded

by   |  October 30, 2007

The General Accounting Office has just released a study called "State and Local Government Retirement Benefits—Current Status of Benefit Structures, Protections & Fiscal Outlook for Funding Future Costs." Download the report here: http://www.gao.gov/new.items/d071156.pdf State and local government employees represent 12% of the nation’s workforce. Nearly 7 million retirees or their families receive post-employment benefits. The GAO found that most state and local pension funds are well funded. The GAO calculates that ongoing contributions to pensions should increase to (on aggregate) 9.3% of payroll from the existing average of 9%. For retiree health care, if funding continues to be on a “pay as you go” basis, the cost, as a percentage of aggregate payroll, will rise from the current 2% of payroll to 5% of payroll in year 2050. The GAO estimates for retiree health care are hardly alarming. Governmental employers, on average, should have little difficulty absorbing a 3% (real) growth in payroll costs over the next 42 years. The report also has an abundance of data about pension governance, prevalence of public sector Defined Benefit and Defined Contribution plans, and the legal protections of pension and retiree health care benefits.