The Trillion Dollar Gap: West Virginia
Underfunded State Retirement Systems and the Roads to Reform
West Virginia's management of its long-term pension liability is cause for serious concern and needs to improve how it handles its retiree health care and other benefit obligations. The Mountain State has funded only 64 percent of its total pension bill—well below the 80 percent benchmark that the U.S. Government Accountability Office says is preferred by experts.
The total unfunded pension liability—nearly $5 billion—is almost twice the size of the payroll of plan members. To its credit, West Virginia has significantly improved the health of its system since the low point of 2003, when only 39 percent of the liability was funded. Since 2000, the state has exceeded its actuarially required contributions in all but two years. West Virginia is one of only three states (along with Idaho and Oregon) in which pension assets reflect the market value—meaning that these states do not average gains and losses over a set period of time.
Meanwhile, West Virginia has set aside 4 percent of the funds required to cover its $6.4 billion long-term liability for retiree health care and other benefits.