US state pension funding gap rises to record-high $1.4 trillion in 2016: Pew

CHICAGO, April 12 (Reuters) - The funding deficit for U.S. state public pension systems rose to a record-high $1.4 trillion in fiscal 2016, a nearly $300 billion increase from fiscal 2015, according to a Pew Charitable Trusts report released on Thursday.

The public worker retirement funds reported only $2.6 trillion in assets to cover total pension liabilities of $4 trillion, with the report pegging the shortfall on investment returns falling short of assumptions and inadequate state contributions to pension systems.

Another factor was a reduction in the assumed rate of investment returns for some plans that pushed the overall unfunded liability higher by $138 billion.

 

RELATED: Oklahoma, Kentucky teachers walk out over pay

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Oklahoma, Kentucky teachers walk out over pay
FRANKFORT, KY - APRIL 2: Thousands of public school teachers and their supporters protest against a pension reform bill at the Kentucky State Capitol April 2, 2018 in Frankfort, Kentucky. The teachers are calling for higher wages and are demanding that Kentucky Gov. Matt Bevin veto a bill that overhauls their pension plan. (Photo by Bill Pugliano/Getty Images)
OKLAHOMA CITY, OK - APRIL 2: Elvin Lee, a teacher from Lawton, Oklahoma joints the teachers' rally at the state capitol on April 2, 2018 in Oklahoma City, Oklahoma. Last week, Gov. Mary Fallin said teachers should come to the capitol to thank her for the raise. Thousands of teachers and supporters are scheduled to rally Monday at the state Capitol calling for higher wages and increased school funding. Teachers are walking off the job after a $6,100 pay raise was rushed through the Legislature and signed into law by Gov. Mary Fallin. (Photo by J Pat Carter/Getty Images)
Oklahoma teachers rally outside the state Capitol in Oklahoma City, Oklahoma, U.S., April 2, 2018. REUTERS/Lenzy Krehbiel-Burton
Thousands of Kentucky school teachers marched Monday, April 2, 2018 from the Kentucky Education Association's headquarters to the State Capitol in Frankfort, Ky. to protest legislative changes to their pensions and education cuts. Public schools in all 120 Kentucky counties were closed Monday, either to join in the protest or because of spring break. (Charles Bertram/Lexington Herald-Leader/TNS via Getty Images)
Oklahoma teachers rally outside the state Capitol in Oklahoma City, Oklahoma, U.S., April 2, 2018. REUTERS/Lenzy Krehbiel-Burton
Oklahoma teachers rally outside the state Capitol in Oklahoma City, Oklahoma, U.S., April 2, 2018. REUTERS/Lenzy Krehbiel-Burton
FRANKFORT, KY - APRIL 2: Public school teachers and their supporters protest against a pension reform bill at the Kentucky State Capitol April 2, 2018 in Frankfort, Kentucky. The teachers are calling for higher wages and are demanding that Kentucky Gov. Matt Bevin veto a bill that overhauls their pension plan. (Photo by Bill Pugliano/Getty Images)
Oklahoma teachers rally outside the state Capitol in Oklahoma City, Oklahoma, U.S., April 2, 2018. REUTERS/Lenzy Krehbiel-Burton
Oklahoma teachers rally outside the state Capitol in Oklahoma City, Oklahoma, U.S., April 2, 2018. REUTERS/Lenzy Krehbiel-Burton
FRANKFORT, KY - APRIL 2: Public school teachers and their supporters protest against a pension reform bill outside the senate chambers at the Kentucky State Capitol April 2, 2018 in Frankfort, Kentucky. The teachers are calling for higher wages and are demanding that Kentucky Gov. Matt Bevin veto a bill that overhauls their pension plan. (Photo by Bill Pugliano/Getty Images)
OKLAHOMA CITY, OK - APRIL 2: Natalie Armstrong (left) and her two daughters Payton and Payzlyn, along with her mother Katrina Sinor rally at the state capitol on April 2, 2018 in Oklahoma City, Oklahoma. Thousands of teachers and supporters are scheduled to rally Monday at the state Capitol calling for higher wages and better school funding. Armstrong said she has spent $3,000 this year for school supplies Teachers are walking off the job after a $6,100 pay raise was rushed through the Legislature and signed into law by Gov. Mary Fallin. (Photo by J Pat Carter/Getty Images)
OKLAHOMA CITY, OK - APRIL 2: Oklahoma teachers rally at the state capitol on April 2, 2018 in Oklahoma City, Oklahoma. Thousands of teachers and supporters are scheduled to rally Monday at the state Capitol calling for higher wages and better school funding. Teachers are walking off the job after a $6,100 pay raise was rushed through the Legislature and signed into law by Gov. Mary Fallin. (Photo by J Pat Carter/Getty Images)
Thousands of Kentucky teachers rallied at the state Capitol in Frankfort, Ky. on Monday, April 2, 2018. (Alex Slitz/Lexington Herald-Leader/TNS via Getty Images)
FRANKFORT, KY - APRIL 2: Public school teachers and their supporters protest against a pension reform bill outside the senate chambers at the Kentucky State Capitol April 2, 2018 in Frankfort, Kentucky. The teachers are calling for higher wages and are demanding that Kentucky Gov. Matt Bevin veto a bill that overhauls their pension plan. (Photo by Bill Pugliano/Getty Images)
FRANKFORT, KY - APRIL 2: Thousands of public school teachers and their supporters protest against a pension reform bill at the Kentucky State Capitol April 2, 2018 in Frankfort, Kentucky. The teachers are calling for higher wages and are demanding that Kentucky Gov. Matt Bevin veto a bill that overhauls their pension plan. (Photo by Bill Pugliano/Getty Images)
FRANKFORT, KY - APRIL 2: Thousands of public school teachers and their supporters protest against a pension reform bill at the Kentucky State Capitol April 2, 2018 in Frankfort, Kentucky. The teachers are calling for higher wages and are demanding that Kentucky Gov. Matt Bevin veto a bill that overhauls their pension plan. (Bill Pugliano/Getty Images)
FRANKFORT, KY - APRIL 2: Public school teachers and their supporters protest against a pension reform bill outside the senate chambers at the Kentucky State Capitol April 2, 2018 in Frankfort, Kentucky. The teachers are calling for higher wages and are demanding that Kentucky Gov. Matt Bevin veto a bill that overhauls their pension plan. (Photo by Bill Pugliano/Getty Images)
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"Many state retirement systems are on an unsustainable course, coming up short on their investment targets and having failed to set aside enough money to fund the pension promises made to public employees," the report said.

Based on preliminary information, Pew said unfunded liabilities should decrease in 2017 due to stronger investment returns last year. It added that funds continue to allocate bigger shares of their assets to riskier investments such as equities, hedge funds, real estate and commodities that can produce higher returns.

Retirement systems in New York, South Dakota, Tennessee and Wisconsin were at least 90 percent funded in 2016, while pension funds in Colorado, Connecticut, Illinois, Kentucky and New Jersey were less than 50 percent funded, according to Pew. Another 17 states had less than two-thirds of the assets needed to pay future retirement benefits.

Kentucky and New Jersey had the lowest funded ratios among states at 31 percent and Wisconsin had the highest at 99 percent.

(Reporting by Karen Pierog Editing by Susan Thomas)

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