The state funds that pay pension and health-care benefits to retired teachers, corrections officers and millions of other public workers faced a cumulative shortfall of at least $1.26 trillion at the end of fiscal 2009, according to a new report.
The study, to be released Tuesday by the Pew Center on the States, found that the pension and health-care funding gap increased by 26 percent over the previous year. Pew officials said the growing shortfall was driven by inadequate state contributions, an aging population and market losses that accompanied the recession.
Although investment markets have recovered substantially since the period covered by the report, its authors warn that states still face an increasing burden from retiree costs that are beginning to crowd out critical services.
“In many states, the bill for public-sector retirement benefits already threatens strained budgets and is competing for resources with other critical needs, including education, infrastructure and health care,” said Susan Urahn, managing director of the Pew Center on the States.
The cost of pension plans and the benefits earned by the approximately 17 million state and local government workers have come under heightened scrutiny in recent years, as private-sector pensions grow increasingly rare and governors struggle to contain costs and, in many instances, reduce taxes.