Public employee pension systems are among the largest financial liabilities on state balance sheets. The 50 states collectively have over $4.5 trillion in cumulative pension liabilities, which is roughly double the amount all 50 states spent in fiscal 2020. For years, state pension systems were woefully underfunded across much of the country, but a recent report by the Pew Charitable Trusts says that trend may be about to reverse.
Driven by higher investment by both workers 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 by cutting funding for other programs.
Still, some states are better positioned to pay retired public sector workers than others. In Pennsylvania, pension liabilities were an estimated $160.0 billion in 2020. The state’s pension wealth, meanwhile, was $93.6 billion. When accounting for assets and liabilities, Pennsylvania’s pension funding ratio is 58.5%, the 12th lowest in the country.
According to 2021 estimates by the Bureau of Labor Statistics, the Pennsylvania state government employs approximately 144,900 people, or 2.5% of the state’s total workforce in the private and public sectors.
It’s important to note that 2020 is the last year for which comprehensive state-level data is available, and the recent market downturn has all but wiped out much of the financial gains that states have made in recent years. Although markets are always prone to turbulence, improved policies have gone a long way toward improving pension financing across much of the country.
All state pension data in this story was compiled by the Pew Charitable Trusts using comprehensive annual financial reports from each state.
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