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Public Pension Ratings: High Variation, Even Within Individual States

Overall, 75% of the states have passing grades regarding their public pension plans. But that bit of fairly good news is not the whole story. The Urban Institute’s latest rating of public pension plans in all 50 states contains some good news, but also draws attention to plenty of red flags. 

When considering states’ overall ratings, Illinois, Maine, Massachusetts, New Jersey and Oklahoma fare the worst. But that doesn’t mean they are the worst at everything. Most of them have high ratings regarding providing retirement income for long-term employees (perhaps contributing to their generally poor or failing ratings for funding ratios, especially if they do poorly in making required contributions). Thrifty Maine received an “A” in making required contributions, but had bad ratings in other areas. 

Overall, the states did well regarding providing retirement income for long-term workers — 38 states had good ratings. That may be encouraging, but some of the states that had the highest ratings did not have high ratings for making required contributions, such as Pennsylvania and Virginia. This helps explain why half the states had bad ratings for funding ratios. 

And while a state many contribute a high amount to long-term workers’ retirements, it may not do so across the board. For instance, treatment of retirement plans for teachers was worse than for state and local employees over all; this is especially the case in California, Illinois, Massachusetts and New Jersey. The same holds for police and fire workers; especially so in Illinois, Maine, Massachusetts, New Jersey and Oklahoma.