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Trouble Keeping Promises? An Analysis of Underfunding in State Retiree Benefits

Authors


Jerrell D. Coggburn is an associate professor and chair of public administration in the School of Public and International Affairs at North Carolina State University. His primary research interests include public human resource management, public management, and administrative reform.
E-mail:jcoggburn@ncsu.edu

Richard C. Kearney is a professor and director of the School of Public and International Affairs at North Carolina State University. He has published extensively in the fields of human resource management, labor relations, and state and local politics and policy. His most recent book is Labor Relations in the Public Sector (4th ed., 2009).
E-mail:Rick_Kearney@ncsu.edu

Abstract

This article examines the funding of two key components of state government total compensation: pensions and other postemployment benefits (OPEB), the latter consisting primarily of retiree health care. A brief overview of the economic, political, and legal environments of state pensions and OPEB is followed by an analysis of the unfunded liabilities for these respective benefits. Regression results suggest the importance of state management capacity, per capita income, and public employee density in understanding differences in the states' pension and OPEB funding performance. Additionally, employers' level of pension contributions, legislative professionalism, and fiscal constraint are significantly related to pension funding, while political ideology and levels of state pension funding are significantly related to OPEB funding. The article concludes by discussing the tensions that states face in attempting to balance the fiscal imperative of funding retiree benefits liabilities with the human capital challenge of attracting and retaining a professional workforce. Failure on either could be costly to state government.

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