On July 18, the Equable Institute released its “State of Pensions 2024”, and while a quick glance at some of the numbers may lead some to think that it’s chock-full of good news, the context the report provides is somewhat less comforting. 

First the good news from the report: “We estimate the 2024 funded ratio for state and local plans will increase to 80.6% as of June 30, 2024, up from 75.8%, based on reported market valued assets. Benchmark estimates suggest an average 2024 investment return of 7.42% will overperform average assumed rates of return. Employer contributions in 2024 exceeded 30% of payroll on average for a third straight year.”

And now the bad news from the report:

Average employer contributions have increased from 17.3% to 31.3% of payroll between 2008 and 2024 while:

• “Unfunded liabilities have risen to levels persistently above $1 trillion.”

• “Funded ratios have not rebounded to pre-Global Financial Crisis levels.”

• “The higher contributions paid are not even enough to prevent interest from continuing to accrue on unfunded liabilities — which is the fastest growing contributor to pension debt for the country as a whole”

The report also points to the reasonable risk that in upcoming years, public pension plans won’t be able to earn the 6.9% return – the average rate the plans are anticipating.

The report concludes that, “Contribution rates will continue growing in the coming years without meaningfully reducing unfunded liabilities—unless state leaders appropriately respond with improved accounting and adequate near-term contribution increases that will gradually decline over time.”

#StateandLocalGovernmentManagement #StateandLocalGovernmentFinance #StateandLocalPensionManagement #StateandLocalPensionUnfundedLiability #StateandLocalFiscalPerformance #StateandLocalHumanResources #StateandLocalWorkforce #StateandLocalRetirementBenefit #StateandLocalDefinedBenefitPensionLiability #StateandLocalPensionContribution #StateandLocalPensionInvestmentReturn #B&GWeeklyManagementUpdate #B&GWeeklySelection #BarrettandGreeneInc