The Widening Gap:

COMMENT: It appears that Delaware has a major problem with the funding of our healthcare plan for state employees.

The Great Recession’s Impact on State Pension and
Retiree Health Care Costs

In the midst of the Great Recession and
severe investment declines, the gap
between the promises states made for
employees’ retirement benefits and the
money they set aside to pay for them
grew to at least $1.26 trillion in fiscal
year 2009, resulting in a 26 percent
increase in one year.
State pension plans represented slightly
more than half of this shortfall, with $2.28
trillion stowed away to cover $2.94 trillion
in long-term liabilities—leaving about a
$660 billion gap, according to an analysis
by the Pew Center on the States. Retiree
health care and other benefits accounted
for the remaining $607 billion, with assets
totaling $31 billion to pay for $638 billion
in liabilities. Pension funding shortfalls
surpassed funding gaps for retiree health
care and other benefits for the first time
since states began reporting liabilities for
the latter in fiscal year 2006.1
Precipitous revenue declines in fiscal
year 2009 severely depleted state coffers
and constrained their ability to pay
their annual retirement bills. States’
own actuaries recommended that they
contribute nearly $117 billion to build up
enough assets to fully fund their promises
over the long term, but they contributed
only $73 billion—or 62 percent of the
total annual bill. This 2009 payment
represents a five percentage point decline
from the previous fiscal year’s contribution,
when they set aside just under $72 billion
toward a $108 billion requirement.

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