Comparing Kentucky to Other States

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Funding Ratios

The national average funding ratio for state public pension plans for 125 plans whose data was available in 2008 is 84.28%. This implies that on average, the nation's public pension plans have $0.84 of assets to cover every $1.00 of liabilities incurred. Most scholars and pension experts consider funding ratio of 80% and above adequate. With the 2008 financial crisis and a poor investment climate, this funding ratio fell. As of June 30, 2009, according to the Public Fund Survey[1], the average funding ratio was 80.9%. The Combined 125 plans in the survey had assets of $2,573,949,097,000 and liabilities of $3,179,896,635,000 with an unfunded liability of $605,947,538,000. With the current market conditions, this unfunded liability can be expected to increase, as some states are realizing negative actual investment returns. It should be noted that investment income for most of these plans funds on average 75% of the obligations.

The chart below shows average funding ratio changes from 1990 to 2008. It is not hard to see the trend: with a peak at full funding 101.8 in 2001/2002, public pension plans funding ratios have consistently fallen over the last 10 years. This picture should be serve as a warning to states and local governments to rectify the pension problem.

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Fig. 1: Data from Public Fund Survey Report

Data from the Public Fund Survey show that funding ratios across states range from the lowest in Indiana Teachers Retirement System at 45.1%, to Oregon Employee Retirement Systems at 110.5% and Washington Law Enforcement and Fire Fighters Retirement plan at 116.5%. States that are more than 100% funded have accumulated more assets than liabilities incurred. As of June 30, 2009, Kentucky's public pension plans were far below the national average funding ratios with trends predicting a continuous decline in the funding levels.

The Kentucky Employee Retirement system (KERS) was 46.7% funded; State Police Retirement System (SPRS) was 54.8% funded; Kentucky Teacher’s Retirement Systems (KTRS) was 63.6% funded and County Employee Retirement System (CERS) was 70.6% funded. These funding ratios are not sustainable, and especially with contributions' continuous decline coupled with economic and market constraints, there is need for state and local government officials to restructure Kentucky's pension system.

See Also


  1. 2009 Public Fund Survey Report