Status and Trends of Unfunded Liabilities of State and Local Pension Funds 2024

Hoover Institution

Oliver Giesecke

Research

46 Pages

Oliver Giesecke examines the true size of U.S. state and local pension liabilities by comparing traditional actuarial accounting with market-based valuation. While pension funding improved in 2024 thanks to 9.4% investment returns, the paper argues governments still substantially understate the economic cost of promised benefits, leaving a much larger funding gap than official figures suggest.

Key Takeaways

Funding Gap Persists: Reported unfunded liabilities total $1.532 trillion, but market-based valuation raises the shortfall to $4.009 trillion, reducing the aggregate funding ratio from 77.7% to 57.1%.
Strong Returns Helped: Pension funds earned a 9.4% asset-weighted return in FY2024, the fourth-highest return since 2014, with roughly 90% of plans outperforming their assumed discount rates.
Contributions Still Short: Total contributions reached 27.4% of payroll, yet governments still need $71.8 billion annually to prevent unfunded liabilities from growing.
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