By Johnny Kampis | Missouri Watchdog

ST. LOUIS — Missouri has promised nearly $6.7 billion to its retirees in pension and health-care benefits not disclosed on state financial statements, and the average taxpayer’s share of the state’s overall debt burden is some $3,800.

That’s the report from Chicago-based think tank Institute for Truth in Accounting, which says Missouri’s liabilities contribute to nearly $900 billion in off-the-books debt nationwide.

Pew Center for the States released its own study Monday, showing $1.38 trillion that states owe to current and future retirees.

Both reports cite fiscal 2010 numbers, the most recent available.

Much of that money is promised in the form of annual pension and health-care payments. Missouri and many other states do not report that debt on their balance sheets, which prevents taxpayers from understanding the severity of the respective state's financial situation, these nonprofit, nonpartisan groups say.

Institute CEO Sheila Weinberg blames “antiquated government budgeting rules” that allow states to balance their budgets by reporting only what they pay each year, rather than accounting for long-term obligations.

“Any benefits public employees get are part of their compensation and should be included in the current budgets,” Weinberg told Missouri Watchdog. “This system allows legislators to pass on incurred costs to future taxpayers. It’s a good political move, but not a financially sustainable model.”

In its most recent study of each state’s finances released last week, ITA found that Missouri reported nearly $500,000 in retirement liabilities, giving it total retirement obligations of nearly $7.2 billion.

This includes $4.1 billion in pension and $3.1 billion in health-care benefits, which represent more than half the state’ total long-term debt of $13.5 billion.

Missouri has set aside only 64 cents on the dollar to pay pension and health-care benefits promised to public-sector retirees, according to the ITA report.

Pew, which is based in Washington, D.C., separates the numbers in its study, noting that Missouri has 77 percent of the funding it needs for pensions, and just 3 percent for health-care costs.

Pew Managing Director Susan Urahn said the retiree benefit crisis is not one states should take lightly.

“In many states, the bill for public-sector retirement benefits already threatens strained budgets,” she wrote in the report. “It will continue to rise significantly if states do not bring down costs or set aside enough money to pay for them.”

Missouri lawmakers took steps to improve its retirement system in 2010, the Pew report said, including increasing new employees’ contributions, raising the retirement age from 62 to 67 and increasing length-of-service requirements for vestments.

Missouri Budget Director Linda Luebbering said she would view the reports and respond to written questions from Watchdog, but she did not reply before Monday's deadline.

The Joint Committee on Public Employment Retirement, consisting of six House and six Senate members, was formed in 1983 to gather, analyze and record the various state and local pension plans in Missouri.

That committee released  in January its 2012 report to the Missouri General Assembly, with conclusions that focused more on the need for transparency to pension plan changes than their skyrocketing costs through the 2010 study period.  

JCPER said that after two years of investment losses in 2008 and 2009, most retirement plans were likely to see two years of gains in 2010 and 2011, with many exceeding assumed investment rates of return.

Sen. Jason Crowell, R-Cape Girardeau, chairman of that panel, could not be reached for comment Monday.

The legislative report noted the 44 of 91 state and local pension plans studied used an assumed rate of return of 7.5 or 7.75 percent, and 14 used 8 percent or higher.

It’s numbers like those that cause ITA to admit its retirement debt estimates may be low.

Weinberg said her organization used government numbers for its report, which included an assumed 8.5 percent rate of return in Missouri.

“If they don’t earn 8.5 percent over the next several years, the numbers will be much worse,” she said.

The actual return in the past decade is about 3 percent, Weinberg said.

She said the public needs to look at retirement obligations as a long-term cash shortfall, which will result in legislatures cutting retirement benefits, trimming other parts of the budget or raising taxes.

“(Missouri) is in such bad shape the answer, unfortunately, may be all of the above,” Weinberg said.