WASHINGTON—More than half of the U.S. states reduced their net pension liabilities in fiscal 2013, Moody's said in a report released Thursday.
Twenty-seven of 50 states reported a decrease in their adjusted net pension liabilities (ANPL) in fiscal 2013, which ended on June 30, 2014, with an average ANPL decline of 16.6%. The other 23 states continued to face outsized pension obligations relative to their revenues, Moody's said in the report on U.S. state pension medians.
Twenty-six of the 27 states had a current 2013 actuarial valuation for their largest pension plan and one had a lagging 2012 valuation.
"The improvements in fiscal 2013 generally were from favorable investment performance which boosted pension valuations, and from most states' budgetary contributions being at or close to actuarially determined contribution levels," said John Lombardi, a Moody's Associate Analyst.
Public pension funds had a median investment return at 12.4% through June 30, 2013, according to Wilshire Associates, Moody's noted in the report.
Annualized investment returns for the median public pension was 16.1%, more than double the estimation rate of 7.75%, according to Callan Associates, an investment consulting firm, Moody's said.
Nearly two-thirds of states' budget contributions were at or close to actuarial determined costs (ACD), which indicated a consistency of budgetary funding, Moody's said. Thirty-four states contributed 90% or more of ADC, while only four states— California, Pennsylvania, Virginia and New Jersey— funded 60% or less of pension costs.
The median ratio of ANPL-to-governmental revenue decreased to 60.3% for fiscal 2013 from 63.9% a year ago, benefiting from rising revenues in most states in fiscal 2013. States, such as Tennessee, Wisconsin and Nebraska, had the lowest adjusted liabilities relative to their revenues, at 20.9%, 13.8% and 12.6%, respectively.
Other states, including Illinois, Connecticut and Kentucky, however, remain outliers on this measure, with ANPL-to-revenue ratios at least three times the median. For example, the ratio for Illinois reached as high as 268.3%.
