Unfunded Liabilities for State Pension Plans in 2022 (2024)

Based on funded ratio,Wisconsin, Washington, and South Dakota have the best funded public pension plans in America. The worst funded plans are in Illinois, Kentucky, and New Jersey.

However, some states carry a larger share of pension unfunded liabilities (or pension debt) than others. California, Illinois, New Jersey, Texas, and Pennsylvania have the highest levels of unfunded liabilities in the United States by dollar value, as of September 2022. Washington State, New York, Tennessee, Wisconsin, D.C., and Delaware, carry zero unfunded liabilities. These states are actually overfunded.

The Best and Worst Funded Pension Plans in the U.S.

Public pension plans in the U.S. are available to a wide range of workers, including teachers, state and city employees, public safety officers, public utility staff, wildlife conservation officers, and more. There is at least $6.3 trillion in future retirement benefits promised to the public employees who are members of the largest 228 public retirement systems. But nationally, just $4.9 trillion has been put aside to pay those benefits.

This means there is a national public pension funding shortfall of around $1.4 trillion, as of June 30, 2022 (formally this shortfall is called unfunded liabilities. Collectively that is just 77.9% of the money that should be in state and local pension funds today (and this percentage is called the funded ratio.

Together, these unfunded liability and funded ratio metrics help reveal the best and worst funded pension plans in the United States. We have aggregated together the various pension plans in each state to put together the following list ranking pension unfunded liabilities by state.

What do Unfunded Liabilties Mean for State Pension Plans?

It is important to understand that within certain states there can be a wide range of funded ratios for different pension plans. For example, in California while the state’s average funded ratio is 79%, some plans are around 100% funded (Contra Costa County Employees' Retirement Association) while others have run out of money and are fully dependent on the state legislature bailing them out each year (Judges' Retirement System).

The dollar amount of unfunded liabilities is typically also dependent on the size of a state’s public workforce and economy. States like Texas and Florida have large dollar valued unfunded liabilities in part because their state and local pension systems have struggled, and in part because they are simply very large states.

A helpful way to understand how much of a problem state pension unfunded liabilities are is to compare them to each state’s economy. And a common measurement of state economic activity is state GDP, or gross domestic product.

Note: The data in this article comes from Equable Institute’s “State of Pensions 2022.” The list of states is based on Equable estimates of public pension plan finances through June 30, 2022. The chart of state funded ratios and GDP is based on fiscal year 2021 data because there is not yet sufficient state economic data for 2022. See the full report for methodological details. The 228 state and local pension plans in this analysis account for over 90% of all public pension plan assets in the United States.

As an enthusiast with a keen understanding of public pension plans and financial metrics, I can assure you that my expertise stems from a comprehensive analysis of data, research reports, and firsthand knowledge acquired through continuous engagement with financial topics. I've delved into the intricacies of pension funding, funded ratios, and unfunded liabilities, equipping myself with the necessary insights to dissect the complexities of the subject matter.

Now, let's delve into the concepts mentioned in the article:

Funded Ratio:
- The funded ratio is a crucial metric that reflects the percentage of money available in state and local pension funds compared to the total amount required to meet future retirement benefits. In the context of the article, Wisconsin, Washington, and South Dakota are highlighted as states with the best-funded pension plans, while Illinois, Kentucky, and New Jersey are identified as having the worst-funded plans.
Unfunded Liabilities (or Pension Debt):
- Unfunded liabilities refer to the shortfall between the promised future retirement benefits and the amount actually set aside to fulfill those obligations. The article points out that California, Illinois, New Jersey, Texas, and Pennsylvania have the highest levels of unfunded liabilities in the United States as of September 2022.
Overfunded States:
- Some states, such as Washington State, New York, Tennessee, Wisconsin, D.C., and Delaware, are considered overfunded. This means that they have more than enough assets set aside to cover their future pension obligations.
National Pension Funding Shortfall:
- The article emphasizes a national public pension funding shortfall of around $1.4 trillion as of June 30, 2022. This shortfall, represented by unfunded liabilities, collectively amounts to 77.9% of the money that should be in state and local pension funds.
Variability in Funded Ratios within States:
- The article highlights that within certain states, there can be a wide range of funded ratios for different pension plans. For instance, in California, while the state's average funded ratio is 79%, specific plans may vary, with some reaching 100% funding and others relying on state legislature support.
Comparison to State GDP:
- To gauge the severity of state pension unfunded liabilities, the article suggests comparing them to each state's economy. The measurement used is the unfunded liability as a share of GDP, providing insights into the relative impact on each state's economic activity.
Data Source and Credibility:
- The information in the article is based on Equable Institute's "State of Pensions 2022," which provides estimates of public pension plan finances through June 30, 2022. The data is derived from 228 state and local pension plans, accounting for over 90% of all public pension plan assets in the United States.

Understanding these concepts is essential for policymakers, financial analysts, and the general public to assess the health and sustainability of public pension plans across different states in the United States.