Steve Malanga makes a great point about how the Wisconsin Retirement System (WRS) managed to appear fully funded in the view of the Pew Center. To achieve the "fully funded" label, Wisconsin transferred part of its pension liability to a different balance sheet by selling "pension obligation bonds" and putting the proceeds into the WRS.
But even excusing this budgetary maneuvering that Steve has called attention to, the WRS is still not fully funded--not by a long shot. The Pew Center relies on each plan's own (faulty) accounting assumptions, including the use of the expected rate of return on investments as the discount rate. When WRS liabilities are discounted with the proper risk-free rate of return, the WRS is roughly 60 percent funded as of 2011.
As Steve notes, the new Pew report that praises the WRS as the only fully-funded state pension system has been cited by public-sector advocates as proof that Gov. Scott Walker's reforms were unnecessary. But the truth is that no state pension plan has healthy finances.
Join the conversation