How Secure Public Pensions Are in Every State
Public employee pension systems are some of the largest financial liabilities on state government balance sheets. The 50 states have over $4.5 trillion in cumulative pension liabilities combined, roughly double the total amount all 50 states spent in fiscal 2020. For years, state pension systems were woefully underfunded in much of the country, but according to a recent report from the Pew Charitable Trusts, this trend may be reversing.
Driven by higher investment from both employees and employers, state pension systems have largely stabilized as of 2020. Since 2007, states across the country have more than doubled annual pension contributions, often cutting funding for other programs to do so.
Still, some states are better positioned to pay public sector employees throughout retirement than others. Using 2020 data compiled by Pew, 24/7 Wall St. reviewed the on-hand financial assets states have in their pension system as a share of their total projected liabilities – or the amount they will have to pay former public sector employees throughout their retirement. States are ranked from the best funded pensions to the worst.
Depending on the state, the share of funded pension obligations ranges from over 100% to less than 40%. As of 2020, half of all states had funding for at least 70% of their total projected obligations.
In contrast to 401(k) retirement plans, which have largely supplanted pensions in the private sector, pensions promise a specified monthly income to retirees for the rest of their life. Under this system, the burden of risk falls on the employer. Public sector workers, such as firefighters, police officers, and teachers, account for a considerable share of the workforce in parts of the country — and for many of them, pensions are critical to financial security throughout retirement. (Here is a look at the best and worst states for healthy retirement.)
It is important to note that 2020 is the most recent year for which comprehensive state level data is available, and the recent market downturn has all but erased much of the financial gains states have made in recent years. Still, while markets are always susceptible to turmoil, improved policies have gone a long way to improving pension funding in much of the country. (Here is a look at the most and least federally dependent states.)
Click here to see how secure public pensions are in every state.
Click here to read our detailed methodology.
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