INDIANAPOLIS – Indiana fared well in two new reports on debt and pension obligations while coming up short in a third.
The Pew Charitable Trusts released data Tuesday showing Indiana has the 11th-lowest debt and unfunded retirement costs as a share of state personal income as of 2013.
The majority of the debt is $15.1 billion in unfunded pension costs with $3.5 billion in other debt and $315 million in unfunded retiree health care costs.
The Pew report overall showed states reporting they owed $968 billion in unfunded pension benefits – the equivalent of 6.9 percent of 50-state personal income, which is a measure of their economic resources. States also reported $587 billion in unfunded retiree health care liabilities and $518 billion in outstanding debt.
"States’ unfunded pension costs – the shortfall between benefits promised to government workers and the savings available to meet those obligations – stand out," the report said.
A second report issued by Moody’s Investors Service has Indiana as 11th lowest in net tax-supported debt per capita at $463. Residents in neighboring Illinois, for example, are burdened with $2,522 of tax-supported public debt per household.
"Keeping a strong handle on our tax-supported debt is a mark of good day-to-day public service, and proves we’re managing our state budgets with prudent fiscal management and responsibility," Gov. Mike Pence said. "Over the past decade, our state has established a history of being a good fiscal steward for the people of Indiana, and this report is just another indicator that we are consistently honoring that trust."
But a third study issued Tuesday found Indiana’s net pension liability has grown and still isn’t being reported fully.
Chicago-based think tank Truth in Accounting said a new accounting rule requires Indiana to come clean about its pension debt, but the state is still hiding some from its financial reports.
As a result of the new rule, Indiana’s reported pension debt increased from $1.1 billion in 2014 to $11.9 billion in Indiana’s 2015 comprehensive annual financial report.
Sheila Weinberg, founder and CEO of TIA, also said the state is using outdated pension numbers and the actual pension debt is $13.5 billion. In addition, state officials are also hiding $651.5 million of retiree health care debt off the state’s balance sheet, the group claims.
She said it’s positive that Indiana’s unfunded retiree health care costs are so low.
Weinberg said Indiana does has assets it could transfer to pay some of the liabilities. Counting those, the state’s overall financial condition is only $4.9 billion in debt.
The State Auditor’s Office, which prepares the annual financial report, said nothing is being hidden at all. Prior to 2015, accounting rules required states to report their net pension obligations on the balance sheet of their financial statements, while disclosing the funded status and funding progress for each plan separately within the footnotes of the financial statements.
The new requirement moved the net pension liability to be reported as a balance-sheet item within the financial statements.
Micah Vincent, head of the Indiana Office of Management and Budget, said Indiana still maintains a AAA credit rating and Standard and Poor’s recently noted Indiana’s plan to draw down the unfunded liability.
"The ratings agencies know us the best and they like where we’re at," he said.
The concern virtually all revolves around the pre-1996 Indiana State Teachers’ Retirement Fund. It is a pay-as-you-go plan, meaning it is not prefunded. No funds have been set aside to pay projected benefits years in the future. Instead, these plans are funded in the year the benefit payment is provided to the member.
Indiana will pay $960 million in benefits this year for the pre-’96 plan and that rises until it peaks in 2026 and begins to go down.
"We have been very disciplined on this along with our partners in the General Assembly," Vincent said. "There has never been a discussion of not paying this."