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Pew Center: Public Pensions, Retiree Health Care Short by $1.26 Trillion

Mike Klein

Last year’s Trillion Dollar Gap has become this year’s Widening Gap.

Fourteen months ago the Pew Center on the States released its landmark study The Trillion Dollar Gap which reported on 2008 fiscal year unfunded liabilities in state public pension and employee retirement health care obligations.  Now the Pew Center’s new The Widening Gap published this week said those same liabilities grew 26% in just one year to $1.26 trillion.

Pension and retiree health care obligations are state government equivalents of the federal five-headed monster:  Medicare, Medicaid, Social Security, the annual operating budget deficit, and trillions of dollars in principal and interest borrowed to run the federal government.

Some state government revenue streams are beginning to recover from a three-year recession that crippled public sector budgets.  Painful decisions were made all across the nation to reduce state government retiree pension and health care account contributions. Investment results also plummeted which helped to create 2008 and 2009 fiscal tornados inside retiree accounts.

Here are some quick facts from The Widening Gap: The Great Recession’s Impact on State Pension and Retiree Health Care Costs:

** Nationally, state public sector pension shortfalls accounted for $660 billion and retiree health care cost shortfalls accounted for $635 billion in fiscal 2009.  Pew noted, “Far too many states are not responsibly managing the bill for their employees’ retirement.”

** Nationally, Pew said states had $31 billion or about 5% of the total needed for retiree health care obligations.  Georgia’s $20.2 billion total retiree health care liability was just 4% funded.  The state made 75% of its $500 million required annual contribution, a $125 million shortfall.

** Nationally, state public sector pension plans were 78% funded at the end of fiscal 2009, down from 84% one year earlier.  Georgia’s $79.9 billion pension obligation was 87% funded and the state made its entire $1.3 billion required annual contribution.  Three-fifths of state plans were underfunded and just two – New York and Wisconsin – were fully funded as fiscal 2009 ended.

Pew noted the federal Government Accountability Office and independent experts recommend states maintain at least 80% funding levels to satisfy retirement account obligations.  Twenty-two states fell short in fiscal 2008 and nine more joined the list in 2009.

Investment earnings – and expectations – play a significant role in the overall health of public sector retirement accounts.  Pew noted most states assume an 8% average investment return.  For years, that model worked well.  Pew said 1984-to-2009 investment returns averaged 9.3%.

But a closer look at the most recent decade is more painful, just a 3.9% annual return between 2000 and 2009.  Investment losses in recessionary times have been dramatic.  Pew said the Georgia Teachers Retirement System fund lost 13.1% in fiscal 2008, which was not nearly as dramatic as the 28.7% decline in the Pennsylvania State Employees’ Retirement System.  Georgia investments rebounded in Fiscal 2010 to earn 11.09%, according to the state retirement system.

“The stakes of this debate are high,” the Pew Center said, “because when a state lowers its investment return assumptions, the projected value of its liabilities and the annual contributions required to meet them increase dramatically.  This, in turn, expands the gap between liabilities and assets.”

Click here to read The Widening Gap.  Click here to read The Trillion Dollar Gap.

Ten Best Funded Public Sector State Pension Plans

101%   New York

100%   Wisconsin

99%     Washington

97%     North Carolina

94%     Delaware

92%     South Dakota

90%     Tennessee

89%     Wyoming

88%     Nebraska

87%     Georgia

Ten Best Funded Retiree Health Care Plans

69%     Arizona

68%     Oregon

32%     Alaska

31%     Ohio

28%     North Dakota

28%     Wisconsin

26%     Virginia

15%     Kentucky

13%     Colorado

13%     Utah

(Mike Klein is Editor at the Georgia Public Policy Foundation)

April 26, 2011 Posted by | Uncategorized | , , , , | Leave a comment

Local Jail Populations Decline Nationally; Fulton Jail Overcrowded Again

Mike Klein

County and city jail populations have declined nationally for two consecutive years, according to just published data from the U.S. Justice Department, but newer state data shows the Atlanta Fulton County jail is once again bursting at the seams and operating beyond its capacity.

The federal government’s annual survey reported 2009 to 2010 local jail population changes were just the second decline since the report began in 1982.  The survey tracks almost three-quarter million men and women who are incarcerated somewhere other than state prisons or federal penitentiaries. Five Georgia county jail systems were named in the report.

The DOJ Bureau of Justice Statistics reported local jail inmates were 748,728 on June 30, 2010, down 2.4% and 18,706 inmates from one year earlier.  Six jails accounted for half the decline:  Los Angeles, Orange and Fresno county jails, all in California; along with Maricopa County, (Phoenix) Arizona; Philadelphia, Pennsylvania; and, Harris County (Houston), Texas.

Fulton County, which includes Atlanta city boundaries, illustrates the complex challenge when tracking inmate populations.  The federal report showed a significant decline at Fulton’s jail which is under a federal court order to alleviate overcrowding by transferring inmates to other jails.  The DOJ said Fulton had 2,271 inmates last June 30 compared to 3,026 one year earlier.

A different Fulton picture emerges from Georgia Bureau of Investigation data contained in the state’s monthly county jail report published April 7.  Fulton had 2,948 inmates on that date less than three weeks ago, well above its 2,688 capacity.   Click here to read the state report.  Most (1,986) were jailed awaiting trial but Fulton’s jail also held some 134 state inmates.

Nationally, local jail populations are still dramatically up during the past ten years.   Comparable inmate totals are 621,149 in June, 2000 and 748,728 ten years later.  The population peaked at 785,586 in June 2008.  The incarceration rate in June 2010 was 242 inmates for every 100,000 U.S. residents, the lowest rate since 2003.  Click here to read the complete federal report.

The study also reported average daily inmate populations.  Los Angeles County had the nation’s largest average daily population with 18,036 inmates followed by New York City jails (13,049), Harris County (Houston), Texas (10,242), and Cook County (Chicago), Illinois (9,383).

Male inmates dominate jail populations (656,350 to 92,638 women) and whites were the largest demographic (331,600) with black/African Americans second (283,200) and Hispanics/Latinos third (118,100).  Department of Justice officials said inmate racial demographics have remained fairly stable for ten years.

The federal report said the number of persons incarcerated in local jails on June 30, 2010, was only a small percentage of total calendar year admissions.  Local jails admitted an estimated 12.9 million persons during the year that ended June 30, 2010.

In addition to Fulton four other metropolitan Atlanta county jail systems were among the nation’s 50 largest local jail populations last year.  Gwinnett held 3,233 persons on June 30 with a 3,198 daily average for twelve months.  Cobb held 2,373, nearly identical to its 2,369 daily average.

DeKalb County held 3,516 inmates last June 30, a 212-inmate increase over 2009.  DeKalb’s average daily inmate population has grown three consecutive years from 2,906 three years ago to 3,404 in 2009 and 3,560 last year.  Clayton County jail held 1,966 persons last June 30, down 25 from one year earlier, but Clayton’s 2,080 average daily population was up 10% in one year.

Georgia Bureau of Investigation data released on April 7 said local jails statewide held 41,833 prisoners.  A comparison of available ten-year data shows local jail populations have grew from 27,025 in January 2001 to 40,648 in January of this year.  The change is a 50% increase.

Georgia took a different corrections step forward on this past Friday afternoon when Governor Nathan Deal signed legislation to create the Special Council on Criminal Justice Reform.  The 13-member council will focus on alternative strategies to adult confinement in state facilities.  The final report is due on November 1 for General Assembly consideration in January.

Georgia has 60,000 adults incarcerated in state facilities and 160,000 on probation or parole.  One-in-13 adult Georgians is under adult corrections system jurisdiction, the worst rate in the nation.  Georgia has the nation’s ninth largest total population but the fourth largest state inmate count.  Next year Georgia will spend $1 billion of its $18.3 billion budget on adult corrections.

(Mike Klein is Editor at the Georgia Public Policy Foundation)

April 26, 2011 Posted by | Uncategorized | , , , , , , | Leave a comment