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State pension debt more than US average

Charleston, W.Va. - Although West Virginia is working to pay down its pension debts, officials say past mismanagement continues to complicate those efforts.

A recent report by Moody's Investor's Service found West Virginia's unfunded pension liability - the amount of money still owed on state employees' retirement plans - is 86.2 percent of its annual revenue in 2011.

That's the 13th highest percentage in the country.

The ranking is based on West Virginia's two largest pension programs, the Teachers Retirement System and the Public Employees Retirement System.

The state's pension liability, as reported by Moody's, is the 24th largest in the nation at $9.2 billion. Illinois' pension liability was $133 billion.

West Virginia still is much better off than states like Illinois or Connecticut, where unfunded liabilities are 241 percent and 190 percent of the states' annual revenues, respectively.

But the Mountain State's pension debt is far above the national average, which is about 60 percent of states' annual revenues. Nebraska has the lowest pension liability in the country, at just 6.8 percent of its budget.

The Moody's report notes "large pension burdens are not associated with the size of a state's economy or budget," but rather "a history of contributing less to their pension plans than the actuarially required contributions."

Moody's said the largest liabilities were created when states did not fund pension plans at a responsible level, deferring payments through "pension holidays" and other quick-fix solutions. While these actions free up money in state budgets for the short-term, they also lead to long-term debts.

State officials say that's how West Virginia found itself near the top of the pension debt list.

"If we would have met those obligations as they were presented, instead of sort of denying in certain years, we'd be a lot better off today," said Senate Finance Chairman Roman Prezioso, D-Marion.

He said lawmakers through the early and mid-1980s neglected to pay the state's pension debts at a responsible level. By 1989, when Prezioso joined the state Senate, West Virginia was more or less bankrupt.

Things are getting better now. At the end of the 2012 fiscal year on June 30, the state' teacher's retirement system was 53 percent funded.

"That means we've got assets, cash and assets in the bank of $5.1 billion. If it was 100 percent funded, we would have $9.6 billion," said Mike McKown, director of the state Budget Office. "If everybody retired today and we shut everything down, that's what we would need."

The state currently is trying to pay down that debt, and will be 100 percent funded by 2034 if all goes according to plan.

"In the '90s, we were in the 'teens percent funded,' " McKown said.

The state's public employees' retirement system is 77 percent funded, with an unfunded liability of $1.2 billion. McKown said the state also is on track to have that debt paid off, but anything around 80 percent funded is considered responsible.

The state's other pension programs are either overfunded, like the judges' retirement system, or very close to it. State trooper pension funds only lack a few million dollars from being 100 percent funded.

"Other states are going the opposite direction, because the recession has forced them to skip these actuarial payments," McKown said.

The most recent Moody's report is based on fiscal year 2011 figures, but the company plans to release 2012 numbers later this year. Moody's said 2012 state pension liabilities are larger than in 2011.

In 2011, ten states had pension debts at 100 percent or more of their annual revenues.

In addition to Illinois and Connecticut, Kentucky's pensions accounted for 141 percent of that state's budget. New Jersey's pension liabilities were 137 percent of its revenue, while Hawaii's pensions accounted for 132 percent.

McKown said spending down West Virginia's liability hasn't been easy. The state puts more than 10 percent of each year's general revenue budget into the teacher's retirement plan.

Prezioso said retirement plans are often the first thing on the table when lawmakers convene to hash out a yearly budget.

"Those are the things we take care of first. We've never had an argument over putting money into pension programs," he said.

Contact writer Zack Harold at 304-348-7939 or Follow him at


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