Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

U.S. State Pension Underfunding Worsens With New Moody’s Formula

Underfunding of state pension plans in the U.S. grew worse under a new Moody’s Investors Service formula, the rating company said in its first report using the standards.

The report, released today, examined pensions in every state and found that the total funded ratio, which measures assets relative to liabilities, fell to 48 percent under its new methodology from 74 percent before the changes. The ratio measures fund management and whether a state is keeping up with promises to retirees.

“States that have the largest relative pension liabilities have at least one thing in common: a history of contributing less to their pension plans than the actuarially required contributions,” New York-based Moody’s said in the report. “Funding history is an important credit factor.”

The 18-month recession that ended in 2009 cut pension investment returns and caused states to cut back on contributions as a way to balance their budgets. States are looking for ways to reduce promised benefits and increase contributions.

Illinois, Connecticut, Kentucky, New Jersey, Hawaii and Pennsylvania have been downgraded over the past three years, in part because of how they managed growing pension liabilities, Moody’s said.

Illinois, which has the worst-funded state pension plans, paid 17 percent more in extra yield in a $1.3 billion general-obligation bond sale yesterday than in April. State lawmakers this year failed to pass legislation to address funding of the pension plan by reducing benefits.

Moody’s also looked at pension obligations relative to government revenue, a measure it said reflects the burden of the plans. Illinois had the highest with 241 percent, followed by Connecticut at 190 percent and Kentucky at 141 percent. The median was 45.1 percent.

Moody’s used fiscal 2011 data and calculations that it said “achieve greater comparability and transparency.” Moody’s used a market-determined discount rate and the market value of assets.

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.