State pensions

Date posted: August 24, 2010

State pensions are important to many workers. In North Carolina state and local government workers as well as teachers rely on state pensions for their retirement. But there is a looming problem in many states where pension funds might run out. How serious is this issue? N.C. Cooperative Extension economist Mike Walden responds.

“Well … this is very serious. This recent study estimated that the state pension funds in all but five states — all but five states — will eventually be depleted by the year 2047, with some states of course running out before others. And actually the average depletion date will be at 2028.

“Now fortunately, fortunately North Carolina is one of those five states where it is not estimated to be running out of pension funds. So this is very, very good news. We are in a very elite class there where our pension system based on this study is considered to be very, very sound.

“But I do think this is a wake up call this study for most of the other states that they need to take steps probably now to shore up their pension funds. And there are a lot of options — none of which are very palatable.

“One is of course to have workers pump more of their own money into the pension fund. Another would be to adjust the pension formula that would perhaps result in folks in the future getting less of a pension. Reduce the annual cost of living adjustment  — that’s another potential option.

“But this is a multi-hundred billion — if not trillion — dollar issue. And again I do want to stress fortunately it does not appear that North Carolina does have a problem.”

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