Many states have not adequately funded their pension and retiree health care obligations, according to a Government Accountability Office report presented to the Senate Finance Committee on Thursday, the New York Times reports. According to the report, which examined about 70 public retirement systems, about half of states have made annual payments toward their pension funds as required by actuaries. The practice would require future generations to pay for government services performed today, the report said.

No state pension funds are about to become insolvent, but some states that also have retiree health care obligations could face financial problems in the future, according to the report. "Unlike pensions, which are funded in advance, health care for retired public workers is generally handled on a pay-as-you-go basis," and, rather than "setting aside money, most states simply pay whatever it costs to provide that year's worth of care," the Times reports. The report found that annual payments for retiree health care obligations currently are smaller than those for pension funds but might become "daunting fiscal challenges" as health care costs continue to increase.

Some state officials told GAO that they have not made required annual payments toward their pension funds because they lack the funds or do not consider the payments a priority. The report did not identify which states have not made required annual payments toward their pension funds.

Senate Finance Committee Chair Max Baucus (D-Mont.) and ranking member Chuck Grassley (R-Iowa) requested the report (Williams Walsh, New York Times, 2/29).

The report is available online.

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