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State unfunded public pension liabilities, 2003-2018
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 Documenting America's Path to Recovery: State budget policy |
Unfunded liabilities refer to a pension fund’s debts—the payments owed to retired members of the pension fund—that exceed its assets of current capital and their projected investment returns. This difference between assets and liabilities is closely watched as an indicator of pension fund performance and management, and unfunded liabilities is also pointed to as a signal of a pension fund’s ability to pay retiree benefits and, in some cases, a signal of a pension fund’s need for reform.
Definitions
- See also: Public pensions in the United States
- Liabilities: The total value of pension benefits owed to current and retired employees or dependents based on past years of service.
- Assets: The current and projected financial resources available to the pension entity to pay retiree benefits.
- Unfunded liabilities: Occurs when a pension liabilities exceed its assets. Also referred to as pension debt.
- Funded Ratio: A calculation of a pension fund's assets divided by its liabilities. The funded ratio is often used as an indicator of a pension fund’s financial health.
Aggregate data on states’ unfunded liabilities
According to the United States Census Bureau, there were 296 state-administered funds and 5,037 locally-administered defined benefit public pension systems in fiscal year 2018. In that same year, state government pension funds held $2.98 trillion in assets and carried $4.22 trillion in liabilities, which results in a funding gap—the funds’ combined unfunded liabilities, or pension debt—of $1.23 trillion.[1]
For the roughly 290 state-level pension systems included in this data compiled annually by the Pew Charitable Trust, the state government is a sponsor, administrator, employer or funder. Not included in this analysis are the more than 5,000 locally administered public employee pension funds affiliated with school districts, police and fire departments, and municipal and county workers.[2]
The aggregate data discussed in this section is not adjusted for inflation, but inflation-adjusted figures are available if you click the tabs at the bottoms of the spreadsheets below.
State-by-state data on liabilities, assets, pension debt and funded ratio from 2003-2018 is available (click the tabs at the bottom of the spreadsheet for inflation-adjusted data):
The trend since the early 2000s shows a steady decline in the funded ratio for state pension funds as the growth in fund liabilities has outrun the growth in assets. The funding ratio of states’ pension funds dropped from nearly 90 percent in 2003 to below 80 percent in the six years between 2003 and the Great Recession year of 2009. The aggregate state pension fund ratio dropped to a low point of 65.9 percent in 2016, before rebounding to the 70 percent level in 2018.
In the years between 2003-2018, the combined state pension funds' unfunded liabilities have grown from $233 billion to $1.237 trillion, more than a five-fold increase.
See also
- Public pension health by state
- State debt per capita (2000-2018)
- Federal outlays to state government (2000-2019)
- Proportion of state government general revenues from the federal government (2000-2020)
- State and local contributions to public pension funds, 2000-2019
External links
- Brookings Institution, "Are state and local pension funds really in crisis?"
- Federal Reserve System, "State and Local Government Defined Benefit Pension Plans: State-level Detail"
- National League of Cities, "How to Measure Pension Fiscal Health"
Footnotes
