For these measurements, we select two categories that
generally compete: affordability and solvency. We measure
“affordability” by comparing the amount of pension
contributions from the state, as an employer, to the
revenue from the state’s general fund budget (or GF-S).
We measure “solvency” by determining how many future
scenarios for our state pension plans result in “pay-go”
(premature trust fund exhaustion) or result in a funded
status below 60 percent. Improving one category will generally weaken the other.
These select risk measurements provide a helpful and quick at-a-glance summary of the financial risks of the state pension plans. The values change each year and can also change materially with the use of different assumptions and methods. We believe these measurements assist stakeholders in the identification, measurement, and management of financial risks in the state’s pension plans. To that end, we believe the model and measurements provide the most value when monitored over time and used to evaluate and understand why risks change over time (or would change when considering a proposed revision to the pension system). We do not intend the model to provide forecasts and the risk measurements do not represent forecasts or predictions for the underlying risks.
We also generate graphs for each risk metric that
provide additional information on the likelihood,
amount, and timing of a given risk based on the
assumptions and methods we use in our model. We provide
a link to the graphs below.
We will continue to update the risk assessment model and these risk measurements annually. Please replace the risk measurements in the future when a more recent set of measurements becomes available.
If you would like additional information and background on the development of the original risk assessment, please see the 2010 Risk Assessment Report.