Deficits Remain in Social Security's Future

March 28, 2002 - The Social Security Board of Trustees reported to Congress on March 26 that the Social Security program continues to be substantially underfinanced for the long term, while extending the projected solvency of the trust funds by three years.

In the 2002 Annual Report to Congress, the Trustees announced:

• The projected point at which tax revenues will fall below program costs comes in 2017 -- one year later than the estimate in last year’s report;

• The projected point at which program costs exceed tax revenues plus interest from the trust funds comes in 2027 -- two years later than the estimate in last year’s report;

• The projected point at which the trust funds will be exhausted comes in 2041 -- three years later than the estimate in last year’s report;

• The projected actuarial deficit of taxable payroll over the 75-year long-range period is 1.87 percent -- slightly larger than the 1.86 percent projected in last year’s report.

"These projections suggest that we have not lost ground in the past year," said Jo Anne Barnhart, Commissioner of Social Security. "However, the report still projects that, once the trust funds are exhausted, payroll tax revenues will be sufficient to meet only 73% of Social Security benefit obligations under current law. And projections for the late 21^st century paint an even bleaker picture.

"The message of this report is clear," Commissioner Barnhart said. "In order to create a sound and sustainable future, long-term trust fund deficits should be addressed in a timely way to allow a gradual phasing in of any necessary changes, and so workers can adjust their plans accordingly.

"The President has put forth six principles to guide our search for a way to ensure that Social Security remains secure through the entire 21^st century. Under these principles, current and near retirees can be assured that their benefits will not be adversely affected; and the 153 million workers covered by Social Security this year can be confident that retirement benefits under the program will be reformed and made secure and the disability and survivors benefit components will be preserved.

"I am convinced that the current period of national debate and discussion can yield a bipartisan plan that will ensure that Social Security will continue to play its essential role for today’s retirees and other beneficiaries, workers, their children and grandchildren. But, as the report issued today makes clear, we cannot postpone our task."

Other highlights of the Trustees Report include:

• The Old-Age and Survivors, and Disability Insurance Trust Funds paid benefits of approximately $432 billion in calendar year 2001;

• There were 46 million beneficiaries on the rolls at the end of 2001;

• Income to the combined Trust Funds amounted to $602 billion in 2001 and expenditures were $439 billion, increasing the assets of the combined funds by $163 billion to $1.21 trillion at the end of 2001;

• The cost of $3.7 billion to administer the program continues to be a very low 0.6 percent of total income;

• Interest earned on the invested assets of the combined Trust Funds was $72.9 billion in 2001.

Based upon the most recent experience and updated methodologies, the Trustees made several changes in assumptions from last year’s report. The shorter-term outlook was improved primarily because of higher assumed productivity growth and revenue from taxes paid on Social Security income. The longer-term deterioration in outlook resulted from the passage of another year, a lower death rate assumption and projected higher benefits on average. The combination means that at the end of the 75-year period the program is in a significantly worse position than projected in last year’s report.

The Board of Trustees is comprised of six members. Four serve by virtue of their positions with the federal government: Paul H. O’Neill, Secretary of the Treasury and Managing Trustee; Jo Anne Barnhart, Commissioner of Social Security; Tommy G. Thompson, Secretary of Health and Human Services; and Elaine L. Chao, Secretary of Labor. The other two members, appointed by the President and confirmed by the Senate, are John L. Palmer and Thomas R. Saving.

The 2002 Trustees Report is posted at www.ssa.gov/OACT.