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ALEC: Hawaii’s Pension System in Bottom 10 Nationally

By Jonathan Williams, American Legislative Exchange Council (ALEC)

 

Friends,

I’m pleased to announce the ALEC Center for State Fiscal Reform just released our latest study: Unaccountable and Unaffordable 2017. I only wish we had more optimistic news to share with you. Our report shows that hardworking taxpayers are on the hook for more than $6 trillion, due to the unfunded liabilities within the 280 state-administered pension plans across the 50 states. Analyzed another way, every man, woman and child in America now owes an average of $18,876 in pension debt.

Unfortunately, the news is not good for the people of Hawaii. The state’s pension funding ratio is now in the bottom 10  nationally and ranks alongside financially unhealthy states such as New Jersey and Illinois.  

The study is now live at: https://www.alec.org/app/uploads/2017/12/2017-Unaccountable-and-Unaffordable-FINAL_DEC_WEB.pdf   I hope you will take a moment to check it out and share it with your network. The report is already receiving some great coverage from the media, including Politico’s Morning Money.

As you know, state and local governments are allowed to play games with their accounting rules and assumptions, which allows them to hide the magnitude of this debt from taxpayers. We hope our latest report will shed some much needed light on the situation and remind Americans how serious this issue is for all of us.  

The good news is that states are starting to make major progress in addressing this critical policy issue. In 2017 alone, policymakers in Arizona, Pennsylvania and Michigan all enacted free market pension reforms.

If we can be helpful in talking about potential policy solutions within the state, please let me know. We are always happy to travel in and help organize a briefing for your colleagues, members or constituents.

Editor's Note

One of the key differences between the estimate in this study and the “official” actuary’s report is the rate of return assumption.  The official report assumes a rate of return of 7%.  The ALEC study uses the long-term tax-exempt rate, which is much lower and therefore yields a much more dire prediction of whether the State retirement system’s assets can pay its anticipated expenses.

 

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