The Montana Public Employee Retirement System (MPERS) has seen a significant increase in public pension debt in the last two decades. In the year 2001, the public pension plan, which serves state workers, was overfunded by almost a half of a billion dollars and had almost 120 percent of the assets they needed on hand to pay promised benefits.
Today, the pension plan is only 74 percent funded and has $2.1 billion in debt.
The latest analysis by the Pension Integrity Project at Reason Foundation, updated this month (February 2021), shows that deviations from the plan’s investment return assumptions have been the largest contributor to MPERS’ unfunded liability, adding $1.3 billion since 2001. The analysis also shows that failing to meet investment targets will likely be a problem for MPERS going forward as projections reveal the pension plan has roughly a 50 percent chance of meeting their 7.65 percent assumed rate of investment return in both the short and long term.
Negative amortization has also added $587 in unfunded liabilities to the plan since 2002. Negative amortization is experienced when interest on debt exceeds actual debt payments in any given year.
The overall growth in unfunded liabilities has driven Montana’s pension benefit costs higher while crowding out other taxpayer priorities and programs in the state.
The chart below, from the full solvency analysis, shows the increase in the Montana Public Employee Retirement System’s debt since 2001:
This underfunding not only puts taxpayers on the hook for growing debt but could jeopardize the retirement security of Montana’s state employees. Left unaddressed, the pension plan’s structural problems will continue to pull resources from other state priorities.
The full Montana PERS solvency analysis also offers stress-testing designed to highlight potentially latent financial risks the pension system is facing. Reason Foundation also highlights a number of policy opportunities that would address the declining solvency of the public pension plan. A new, updated analysis will be added to this page regularly to track the system’s performance and solvency.
Bringing stakeholders together around a central, non-partisan understanding of the challenges the Montana Public Employee Retirement System is facing—complete with independent third-party actuarial analysis and expert technical assistance—the Pension Integrity Project at Reason Foundation stands ready to help guide Montana policymakers and stakeholders in addressing the shifting fiscal landscape.
Reason Foundation’s previous solvency analysis of the Montana Public Employee Retirement System is available below:
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