Funding Status and Progress:

The amount shown as "pension benefit obligation" is a standardized disclosure measure of the present value
of pension benefits, adjusted for the effects of projected salary increases, estimated to be payable in the future
as a result of employee service to date. The measure is the actuarial present value of credited projected benefits
and is intended to help users assess the Systems' funding status on a going - concern basis, assess progress made
in accumulating sufficient assets to pay benefits when due, and make comparisons among public employee
retirement systems. The measure is independent of the actuarial funding method used to determine
contributions to the System as described below.

The pension benefit obligation was determined as a part of an actuarial valuation at June 30, 1988.
Significant actuarial assumptions used include (a) a rate of return on the investment of present and future assets
of 7.5 percent per year compounded annually, (b) projected salary increases from 5 percent to 6 percent per year
compounded annually, attributable to inflation, (c) additional projected salary increases ranging from. 79 percent
to 6.8 percent per year, attributable to seniority/merit, and (d) postretirement benefit increases ranging from
3 percent to 6 percent per year depending on the system. At June 30, 1988, the unfunded pension benefit
obligation (i.e., pension obligation less net assets available for benefits) of the System was as follows (amounts
expressed in thousands):

No changes in actuarial assumptions which significantly affected the valuation of the pension benefit
obligation occurred during fiscal year 1988.

Contributions Required and Made:

The State's retirement contributions are appropriated annually, based upon actuarial valuations. In this
regard, the System has engaged an independent firm of consulting actuaries to prepare annual actuarial
valuations and perform various actuarial consulting services. Effective July 1,1980, in accordance with the law
governing the System, all benefits of the System are funded in advance. The entry age normal cost method is
the actuarial cost method used to determine the employers' normal and accrued liability contribution rates and
the unfunded actuarial accrued liability. Using this method the actuarial present value of the projected benefits
of each individual included in an actuarial valuation is allocated on a level basis over the earnings or service of
the individual between entry age and assumed exit age(s). The portion of this actuarial present value allocated
to a valuation year is called the normal cost. The portion of this actuarial present value not provided for at a
valuation date by the actuarial present value of future normal costs is called the actuarial accrued liability.

Employer contributions to the System totaling $576,766,000 (14.7% of covered payroll) for fiscal year 1988
were made in accordance with actuarially determined contribution requirements based on an actuarial valuation
performed as of June 30, 1986. This amount consisted of $246,836,000 normal cost and $329,930,000
amortization of the unfunded actuarial accrued liability. Employee contributions to the System for fiscal year
1988 were $106,571,000 (2.7% of covered payroll).

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