Report: Idaho’s Pension System Fares Better Than Most

Pew Center on the States

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Idaho is faring better than many states when it comes to funding its public employee pension and retiree health care systems.

A Pew Center on the States study on the widening gap between states’ assets and their obligation to fund pension systems ranks Idaho in the “needs improvement” and “solid performer” categories.  Most states — 32 of them — landed in the “serious concern” category.

Here’s Pew’s assessment of the situation across the country:

“In fiscal year 2010, the gap between states’ assets and their obligations for public sector retirement benefits was $1.38 trillion, up nearly 9 percent from fiscal year 2009. Of that figure, $757 billion was for pension promises, and $627 billion was for retiree health care.

Though states have enough cash to cover retiree benefits in the short term, many of them—even with strong market returns—will not be able to keep up in the long term without some combination of higher contributions from taxpayers and employees, deep benefit cuts, and, in some cases, changes in how retirement plans are structured and benefits are distributed.” – Pew Center on the States

According to the report, Idaho consistently paid its full pension contribution between 2005 and 2010.  But the system as a whole falls just under the 80 percent solvency mark that many experts agree makes for the most “fiscally sustainable” systems.

“[Idaho’s] system was 79 percent funded in fiscal year 2010 and faced a $3 billion funding gap.  The state also had a $137 million bill for retiree health care costs, 12 percent of which is funded, exceeding the 8 percent national average in 2010.” – Pew Center on the States

Pew senior researcher David Draine says Idaho slid from the “solid performer” to “needs improvement” category between 2008 and 2010.  Draine says that’s almost entirely due to investment losses during the 2008 financial crash.

Draine says the recession and resulting revenue drop brought Idaho’s solvency level from 93 percent in 2008 to 74 percent in 2009. The funding gap rose from $785 million to $3.2 billion.

The good news?  Idaho took that financial hit all at once, where many states “smooth” their losses and gains over a five year period.  While some states will continue to feel investment losses from the 2008 crash, Idaho’s pension system is on the upswing.

“[Idaho is] fairly close to being in the top performer category,” says Draine. “It would not be surprising to see them in that category next year.  But that requires continued funding discipline.”

Idaho’s Public Employee Retirement System provides benefits to more than 125,000 people.