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U.S. State Pension Deficits to Widen as Investment Gains Shrink

  • The gaps to increase over next two years, Moody’s report says
  • Half of states didn’t contribute sufficient amount to pensions

The shortfalls in U.S. state pension funds are poised to increase over the next two years as investment returns lag forecasts and many governments fail to set aside enough to cover promised benefits, according to Moody’s Investors Service.

The unfunded liabilities already stood at about $1.25 trillion in the 2015 fiscal year, which ends in June for most states, the rating company said in a report released Friday. The retirement plans’ investments were battered by stock-market volatility over the following year, leaving an average return of about 0.5 percent, far less than the 7.5 percent growth they typically assume, according to Moody’s.