Arizona’s retirement plans had a liability of $48.8 billion and the state has fallen $12 billion short in setting aside money to pay for it. Although Arizona consistently paid, or exceeded, its full annual pension contribution from 2005 to 2010, the system was 75 percent funded in fiscal year 2010 and faced a $12 billion funding gap.
According to the Pew Research Center, most experts agree that a fiscally sustainable system should be at least 80 percent funded. The state also had a $713 million bill for retiree health care costs, 69 percent of which was funded, well above the 8 percent national average in 2010.
Arizona lawmakers approved pension cuts in 2010 and 2011, including raising employee contributions, lowering state contributions, and limiting cost-of-living increases. But a district court judge said in 2012 that the higher contributions were unconstitutional, leaving their status in doubt.
In 2010, Arizona paid 101 percent of the recommended contribution to its pension plans and 100 percent of what the state should have paid to fund retiree health benefits.