Idaho Public Pension Program Grows Membership, Unfunded Obligations

Published September 28, 2016

A public pension program in Idaho managing employee retirement benefits for nearly 800 local and state government entities and 135,000 enrollees added two local government employee group districts to its ranks in late August, but the expanded ranks and pension contributions may not be enough to keep the taxpayer-funded retirement program afloat.

In late August, the Public Employee Retirement System of Idaho (PERSI) added government employees from Kimama Highway District, a government entity tasked with public highway maintenance in Paul, Idaho, and the Alturas International Academy, a public charter school located in Idaho Falls, to the public pension program.

The new members were added shortly after PERSI announced government pension investment returns for fiscal year 2016 fell far short of the required funding targets. In the previous fiscal year, the government pension program’s investments increased by 1.53 percent. PERSI’s earnings forecast anticipated a 7 percent return on investments.

Idaho public pension liabilities exceed revenue by more than $2.3 billion.


Calls for Realistic Projections

Dustin Hurst, communications director for the Idaho Freedom Foundation, says the state’s lawmakers should have seen PERSI’s funding problems coming.

“The funding issue comes down to both projections and performance,” Hurst said. “The PERSI board has a duty to use realistic numbers, and they often struggle with that. The fund’s performance is uneven, like any investment might be. Lower projections on returns would allow government to properly plan for market turbulence.”

If PERSI’s books aren’t balanced, government employees and taxpayers will be the ones paying for it, Hurst says.

“If PERSI continues its struggles, oversight board members will likely return to taxpayers for more cash,” Hurst said. “They will likely raise contribution limits for government employers, which means greater costs for cities, counties, schools, and the state. Local governments will face a tough choice: raise taxes to cover costs or cut services.”


Overpromising, Underfunding

Sheila Weinberg, founder and chief executive officer of Truth in Accounting, a nonprofit government watchdog organization, says Idaho’s state employee retirement spending problems may be worse than originally thought.


“Another area of concern should be the … underfunded retirees’ health care benefits,” Weinberg said. “In 2015, the state had promised $149 million of these benefits, but only $30 million were set aside to fund them. The state will have to come up with the money to pay promised pension and retirees’ health care benefits. No matter what happens in the marketplace, the taxpayers have been given the ultimate responsibility of paying for these benefits.”