A trillion-dollar funding shortfall in benefits from public sector retirement funds is presenting “;serious concerns”; in Hawaii and 18 other states with funding levels below the 80 percent of long-term liabilities, according to a new study. State legislators need to find ways to correct the problem without placing onerous burdens on either the state employees or, especially, the taxpayers.

The Pew Center on the States reports that state-administered pension plans, retiree health care and other retirement benefit packages in all 50 states have been shortchanged. Nationally, the cost could amount to $8,800 for each American household in the coming decades.

Overall, states in 2008 had $2.4 trillion invested to meet $3.4 trillion in retirement benefits. The center reports that the Hawaii Employees Retirement System had a funding level of 68.8 percent, a total liability of nearly $16.6 billion in fiscal year 2008 and an unfunded liability of $5.2 billion, about 1.33 times the state's payroll.

The report attributes some of the shortfall to the Legislature's diversion of $1.7 billion from annual contributions to the underfunded pension system in the early years of the past decade. State employees paid nothing into the pension system until 2006, when a contributory system began, it notes.

Pension Consulting Alliance Inc., the financial adviser to the Hawaii system's board of trustees, reported this month that the fund grew by 3.7 percent in the second quarter of the current fiscal year. However, the portfolio finished the last fiscal year with its worst-ever loss of 18.7 percent.

The Pew Center notes that the Hawaii system found that retirees were living longer and employees were retiring earlier than projected. The Legislature responded by increasing employer contributions in 2007 from 13.75 percent to 15 percent for most employees and from 15.75 percent to 19.7 percent for police officers and firefighters, effective in 2008, and placed a three-year moratorium on benefit increases until 2011.

“;With these kinds of accumulated pressure,”; it comments regarding Hawaii, “;many states are considering reforms. This is a topic that can no longer be put off until some uncertain tomorrow.”;

Many states dealt with the problem in ways other than increasing taxes. Those included reducing benefits offered to new employees and reducing health care and other non-pension benefits. New York lawmakers in December increased the minimum retirement age from 55 to 62, raised the minimum years of service from five to 10 years to qualify for a pension and capped the amount of overtime used in calculating benefits.

Obviously, the actions taken by past Hawaii Legislatures have been insufficient to attain stability of the state's retirement system. Now wrestling with furloughs, layoffs and a raft of tax proposals to mitigate the state's $1.2 billion budget deficit, legislators must not look at increasing taxes as a solution to the retirement-fund shortfall. Instead, terms of state workers' retirement buy-in and benefits should be restructured.