Source: Matthew Butler, Joshua Grundleger, Emily RaimesMoody’s, Sector In-Depth, State government – US, April 9, 2019
Recent actions by states signal growing recognition that as pension burdens — unfunded liabilities and annual costs — escalate for K-12 school districts, state assistance will likely need to increase. California (Aa3 positive), Indiana (Aaa stable) and Oregon (Aa1 stable) all recently proposed budget legislation that would boost school funding by making increased payments to teacher pension plans on behalf of districts. The proposals call for one-time contributions to the pension plans rather than recurring pension contribution support on behalf of local districts like Colorado (Aa1 stable) and Michigan (Aa1 stable) have recently committed to provide. Additional states are likely to increase funding for teacher pensions,reflecting the growing credit risks underfunded plans present.