State Teachers' Pension Funding: A Ranked List

(December 12, 2012) – Every US state spare Alaska has a defined benefit (DB) pension system to fund its teachers’ retirements. 

The largest—the California State Teachers’ Retirement System, with almost $155 billion under management—is 27th when it comes to funded statuses, according to actuarial data. 

The National Council on Teacher Quality, a research/policy group advocating for education reform, complied this data from each system’s actuarial valuations for its latest report. 

The District of Columbia in fact beats out all of the real states, with assets totally 101.9% of its total liabilities. Indiana brings up the rear with only 44.3% of its liabilities covered at the close of the 2012 fiscal year. 

Take the best-funded states with a grain of salt, however, advises Sandy Jacobs, the research group’s managing director for state policy. 

“It’s a mixed bag among these top states: In some cases, the numbers may not be as rosy as they appear. For example, Wisconsin did a bond issue a few years back, so that means they offset one kind of debt with another kind of debt. Other states, by hook or by crook, have managed to stick with the payments they’ve made.” 

For instance, Washington, D.C., is a special case. The federal government is responsible for paying all liabilities accrue by public school teachers on or before June 30, 1997. The state—in the form of the District of Columbia Retirement Board—is responsible for paying benefits for services after that date. 

Washington, D.C. is one of nine states that ensure teacher pension plans are well-funded and stable, according to the report. But this doesn’t mean any teacher pension system have state-legislated funding thresholds, the way many corporate plans do. “Would that it were so!” Jacobs exclaimed at that possibility. 

As for the bottom quartile, Jacobs explained, “it’s a lot of different scenarios in different states. The feeling in many is that this is a down-the-road debt. When budgets are made and budgets are tights, meeting these teacher pension liabilities doesn’t seem as pressing.” 

Despite some politicians’ recent pushes for state pension overhaul—not all of them successful—Jacobs thinks reform is still further behind than it should be. “I think we’re still in the sounding the alarm period, unfortunately. Some states have woken up and said we’ve got to start doing something with this. And others are still on a 30-year recovery path.”