Ohio’s public pension plans have so much debt that paying it off today would cost each resident $25,080.
According to a new report, “Promises Made, Promises Broken 2014,” by the nonprofit State Budget Solutions, the amount of unfunded pension obligations in Ohio has grown to nearly $290 billion, fifth highest in the nation.
That’s despite recent changes in the pension plans that were supposed to address the unfunded liability.
“That’s a very scary place for Ohio. The national average is $15,000, so $25,000 is just terrible,” said Joe Luppino-Esposito, SBS editor and general counsel and the author of the report.
He said the $25,080 places Ohio third in highest per-capita debt. Alaska, in part because of its low population, was first, and Illinois was second.
Ohio has several individual plans — for teachers, police and fire, state employees, school employees and the state highway patrol. Participants and the public employer contribute to the plans just as non-public workers and employers contribute to Social Security.
The plans are categorized as defined benefits, with the amount of payment upon retirement based on the three highest years of earnings while working.
That’s part of the problem, Luppino-Esposito said.
It’s hard to know the exact amount the plans will have to pay out years in the future when current employees retire because there is no way to know for sure how much will be owed, he said. People are working longer and more likely to have higher earnings. They’re also living longer, so they’re collecting pensions for more years.
The methods states use to project how much money they need to contribute to the funds every year also contributes to the problem because estimates could be off.
Luppino-Esposito warned that the consequences of ignoring the unfunded liabilities could lead to a situation similar to Detroit’s.
“When the money starts running out and you have to pay more for pensions, you start cutting back on essential services,” he said. “The result in Detroit was bankruptcy for the city, and then pensioners had to end up taking a cut in benefits. The sooner the unfunded liabilities get addressed, the better for everyone.”