By Rachel O'Brien, Deputy Policy Editor, OpenTheBooks.com
Tennessee has one of the best funded pension systems, and Nashville also appears to be overfunding its pensions, but Metro’s promised retiree health care benefits are underfunded.
Non-profit Truth In Accounting’s annual Financial State of the States for 2022 ranked Tennessee No. 7 out of 50 because, according to the state’s latest audited financial report for FY 2021, it had a surplus.
While reported to be $4.6 billion surplus in FY 2022 — that went down to $1.6 billion — TIA estimated a far larger surplus of $12 billion based on total state assets and total bills. That amounts to a surplus of $5,800 per taxpayer.
The TIA report, completed in conjunction with University of Denver’s Daniels College of Business, School of Accountancy, gave Tennessee a “B” financial grade — given to states with a taxpayer surplus between $100 and $10,000.
Metro Nashville, on the other hand, has an estimated $2.3 billion debt burden due, in part, to underfunded retiree health benefits. That works out to be $11,30 of debt for every city taxpayer, according to Financial State of the Cities for 2023.
The report, also completed by TIA in conjunction with University of Denver’s Daniels College of Business, School of Accountancy, ranked Nashville No. 63 out of the 75 most populous cities and gave it a “D” financial grade.
“With inflated pension asset values … the city’s pension plans appeared to be overfunded, but it had only set aside six cents for every dollar of promised retiree health care benefits,” the report found.
While Metro Nashville has made changes to save on paying for retiree health care benefits, some still have 75% of insurance premiums covered for life.
As The Tennessean reported, “Nashville's generous post-employment healthcare package was instituted decades ago. It only became unsustainable in more recent years as healthcare costs ballooned.”
TIA calculated Nashville’s pension liability — or lack thereof — by subtracting earned and promised benefits from the market value of pension assets.
A Metro Nashville spokesperson didn’t respond to a request for comment by our deadline.