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Overview of U.S. Public Pension Fund Performance in 2024

The Equable Institute has recently published its State of Pensions 2024 year-end update, revealing a notable recovery in the performance of U.S. public pension funds. As of December 31, 2024, the aggregate funded ratio of these state and local systems has risen to 80.2%, up from 75.5% in 2023. This positive trend is primarily attributed to impressive investment returns made over the last year, which averaged 10.3% across various funds.

Investment Growth and Financial Health

In light of these developments, it is important to note that the returns have surpassed the assumed average rate of 6.87% for pension funds. However, while these figures certainly indicate progress, they remain lower than the returns of some of the major public equity indices, such as the S&P 500.

According to Equable's Executive Director, Anthony Randazzo, a second consecutive year of positive returns provides much-needed relief, yet the financial stability of state and local retirement systems still appears fragile. With only 80% of necessary assets secured within the pension funds, significant increases in contributions are crucial to addressing the $1.37 trillion in unfunded liabilities recorded for the current fiscal year. This scenario raises concerns about the risk of another financial crisis if these liabilities are not effectively managed.

Rankings of State Pension Health

The year-end update also ranks the estimated funding status of pension systems across all 50 states and Washington, D.C.. District of Columbia leads the charge with a robust funded ratio of 112.5%, followed closely by Nebraska and Tennessee at 108.5% and 107.9% respectively. On the flip side, states like New Jersey and Illinois are grappling with the lowest funded ratios, standing at 56.6% and 51.6% respectively.

Top 10 States by Funded Ratio:
1. District of Columbia: 112.5%
2. Nebraska: 108.5%
3. Tennessee: 107.9%
4. Utah: 104.2%
5. Washington: 102.5%
6. Wisconsin: 102.1%
7. West Virginia: 100.4%
8. South Dakota: 100.0%
9. Minnesota: 93.2%
10. New York: 92.8%

Conversely, states with the least funding include:

• - New Jersey: 56.6%
• - Kentucky: 54.1%
• - Illinois: 51.6%

This significant disparity stresses the need for concentrated efforts towards improving the financial health of pension systems, particularly in states that are lagging considerably.

Moving Forward

While the upward trend in funding ratios and investment returns provides a glimpse of optimism, it does not erase the challenges that state and local funds face. The report reinforces the message that there's still a long way to go to achieve adequacy in funding and stability in public pension systems. Stakeholders must continue to devise data-driven strategies to enhance financial conditions, ensuring the long-term security of public sector workers' retirements.

To delve further into the State of Pensions 2024 report, including detailed data visualizations and insights, visit the Equable Institute's website for comprehensive information.

About Equable Institute

The Equable Institute is a bipartisan, nonprofit organization focused on promoting financial responsibility and accountability in public retirement systems. By leveraging data-driven solutions, it aims to assist local and state governments in navigating pension funding challenges while safeguarding the retirement security of public service workers.

For further exploration of their findings and methodologies, access the Equable Institute's online resources and engage with the latest analytics related to public pensions.