(The Center Square) – Iowa ranks seventh in the nation for its funding of pension liabilities.
While its neighboring state of Illinois has $121.25 billion in unfunded pension liabilities, Iowa is one of eight states that have more than adequate funds to pay pensions, Reason Foundation reported.
Iowa, which has about $120 million more than it needs to fund pension liabilities, is one of nine states that are fully – or overflowingly – funded. Iowa’s funded ratio is 100%, the report said. Idaho and North Carolina are at that level as well. The state with the highest funded ratio, 113%, is New York.
Investment returns broke records in 2021, reducing longstanding pension debt, but that could change for 2022, the report said.
Reason Foundation’s report said early indicators of fiscal year 2022 pension financial reports suggest investment returns could average 6% lower. In that case, Iowa’s funded ratio would be 89%. Its unfunded liabilities would total roughly $5.41 billion. Only Washington and Wisconsin are projected to be at least 100% funded under that projection.
If returns are 12% lower, Iowa’s pension liabilities would be 83% funded, lacking about $8.14 billion. Only Washington would be fully funded.
Iowa’s pensions were less than 90% funded from 2002 through 2004 and from 2009 through 2020, according to a map in the report.
The report writers said state and local leaders should continue trying to make public retirement systems resilient despite economic volatility.
“The significant levels of volatility and funding challenges pension plans are experiencing right now support the Pension Integrity Project’s position last year that most state and local government pensions are still in need of reform, despite the strong investment returns and funding improvements in 2021,” the report said. “Unfortunately, many observers mistook a single good year of returns – granted a historic one – as a sign of stabilization in what was a bumpy couple of decades for public pension funding. On the contrary, this year’s returns, as well as the growing signs of a possible recession, lend credence to the belief that public pension systems should lower their return expectations and view investment markets as less predictable and more volatile.”