Morningstar Municipal Credit Research Finds Wisconsin the Strongest-Funded Pension System and Illinois the Weakest

  Morningstar Municipal Credit Research Finds Wisconsin the Strongest-Funded
                   Pension System and Illinois the Weakest

PR Newswire

CHICAGO, Nov. 26, 2012

CHICAGO, Nov. 26, 2012 /PRNewswire/ -- Morningstar, Inc. (NASDAQ: MORN), a
leading provider of independent investment research, today published its
research report, "The State of State Pension Plans: A Deep Dive into
Shortfalls and Surpluses," which analyzed current data for pension plans
administered by all 50 states. Morningstar's municipal credit analysts found
that based on two key funding metrics, the state of Wisconsin had the
strongest-funded pension plan system, while Illinois had the weakest.

Morningstar's pension plan analysis focused on two key metrics:

  oFunded Ratio: the ability of a pension plan to meet its obligations, which
    is calculated by dividing the pension plan's assets by its liabilities,
  oUnfunded Actuarial Accrued Liability (UAAL) Per Capita: the unfunded
    liability per capita, representing the amount each person in the state
    would need to pay to fully fund this unfunded liability.

"Our analysis of the fiscal health of state pension plan systems across the
country found that creditworthiness varies greatly and is heavily dependent on
the funded ratio and the unfunded liability per capita—we look at both key
metrics to evaluate each state's system. We find the UAAL metric useful
because it represents the burden on residents, though it isn't widely used in
the industry as an evaluation tool," said Rachel Barkley, municipal credit
analyst for Morningstar. "Not only do state pension plan systems represent the
state's financial obligations, but they are often structured as umbrella plans
that also cover employees in the state's local government bodies. Because
pension liabilities represent significant long-term obligations for government
entities, pensions are an important element in determining a municipal
entity's credit quality."

Jeff Westergaard, Morningstar's director of municipal analytics, added, "We've
heard much discourse on the subject of pensions over the last few years,
resulting in more confusion than clarity on how to view this important area of
municipal finance. Our hope is that Morningstar's analysis will help cut
through the clutter and offer logical, clear analysis for investors to
understand each state's situation and the broader implications of their
pension system's financial status."

Additional key conclusions from Morningstar's review of state pension plan
systems include:

  oWisconsin had the strongest-funded pension system; the state's funded
    ratio is 99.8 percent and the liability per resident is $23. Illinois had
    the weakest-funded system, with a 43.4 percent funded ratio and a
    liability of $6,505 per resident;
  oTwenty-one states fall below Morningstar's fiscally sound threshold of a
    70 percent "funded ratio;" Illinois has the lowest funded ratio;
  oSeven states have an aggregate funded ratio of 90 percent or more, led by
  oFourteen states have a UAAL under $1,500 per capita, Morningstar's
    threshold for "Good" unfunded liability levels. Wisconsin has the lowest
    UAAL per capita;
  oTwenty states have a UAAL above $3,000 per capita; Alaska has the highest
    UAAL per capita, currently more than $10,000.

Morningstar's state pensions research report also includes an evaluation of
trends across the country, challenges of comparing state pension plans,
shortcomings in disclosure and transparency, and expectations about pension
reform. Morningstar analysts also compiled aggregate pension data by state,
including assets, funded ratio, and UAAL per capita, along with individual
pension plan data by state.

An excerpt of "The State of State Pension Plans" is available at For a video and article
highlighting the research findings, please visit For more information about
Morningstar's analysis of government pension plans, the company's "State and
Local Pensions 101" overview is available at

Morningstar plans to update its research on state pension plans annually. The
company launched analyst research on 100 municipal obligors and bond reports
for approximately 1 million municipal bonds earlier this year. More
information about Morningstar's municipal bond research is available at

About Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in
North America, Europe, Australia, and Asia. The company offers an extensive
line of products and services for individuals, financial advisors, and
institutions. Morningstar provides data on more than 385,000 investment
offerings, including stocks, mutual funds, and similar vehicles, along with
real-time global market data on more than 8 million equities, indexes,
futures, options, commodities, and precious metals, in addition to foreign
exchange and Treasury markets. Morningstar also offers investment management
services through its registered investment advisor subsidiaries and has
approximately $195 billion in assets under advisement and management as of
Sept. 30, 2012. The company has operations in 27 countries.

©2012 Morningstar, Inc. All Rights Reserved.


Media Contact:
Nadine Youssef, +1 312 696-6601 or

SOURCE Morningstar, Inc.

Press spacebar to pause and continue. Press esc to stop.