Unfunded liabilities in the Retirement Systems of Alabama pensions will continue to grow without reform, according to the Reason Foundation.<\/p>\n
The Reason Foundation\u2019s Brayden Myers said recently<\/a> that the gap between assets and liabilities in Alabama\u2019s pension systems has persisted since legislators made reforms in 2011 and 2012.<\/p>\n Myers said, \u201cAlabama\u2019s unfunded liability now sits at over $24 billion, up from roughly $14.4 billion a decade ago. Despite rising pension contributions, rather than shrinking, the debt has continued to grow, generating liabilities that compound the problem each year, even during periods of strong market performance.\u201d<\/p>\n \u201cPart of the reason the unfunded liability keeps growing is that the state just isn\u2019t putting enough money into the system to close the funding gap. Alabama ranks 44th nationally in employer contribution adequacy rates, according to Reason. This ranking calculates the contribution needed to pay off unfunded liabilities over 20 years. Alabama\u2019s actual contributions fall short of this benchmark. The state\u2019s aggregate employer contribution rate is 13 percent of payroll, well below the national average of 21.6 percent, suggesting most states are contributing more to address their pension debt than Alabama. Low contributions today mean higher costs tomorrow, as debt continues to compound,\u201d he added. \u201cLowering the assumed rate of return toward something closer to the demonstrated long-term performance would increase the required state contributions and raise the measured unfunded liability in the short term, but it would give legislators and the public a more accurate picture of what the retirement system actually costs. Alabama lawmakers made great strides in reforming the state\u2019s retirement system for government workers back in 2012, but growing debt and runaway costs suggest the need for further reforms to the system\u2019s market-return assumptions.\u201d<\/p>\n Myers continued, \u201cLowering return expectations to more realistic levels will require more from government employers up front, but it will slow the state\u2019s current path of ever-growing annual contributions placed on the backs of taxpayers, driven by the ongoing realization of more pension debt. To get the state back on track with pension funding, policymakers need to enact lasting reforms that address the sources of the state\u2019s growing pension shortfall.\u201d<\/p>\n To connect with the author of this story or to comment, email [email\u00a0protected]<\/a>.<\/p>\n