Pension Reform News: Reason’s annual report finds $1.5 trillion in aggregate pension debt

In This Issue:

Articles, Research & Spotlights 

• Reason’s Annual Report Finds $1.5 Trillion in Aggregate Pension Debt 
• Undoing California’s Pension Reforms Could Cost Billions
• What Government Worker Reductions Mean for Pensions

News in Brief
Quotable Quotes on Pension Reform
Data Highlight
Reason Foundation in the News
Contact the Pension Reform Help Desk

Articles, Research & Spotlights

Reason Foundation’s Annual Pension Solvency and Performance Report Finds $1.48 Trillion in Debt

Today, Reason Foundation is publishing our 2025 Pension Solvency and Performance Report. It’s an interactive dashboard that lets users explore an aggregated, plan-level overview of key public pension funding and investment metrics, actuarial assumptions, and other performance indicators for government-run pensions. New to the report are state rankings of funding, contribution adequacy, and investment metrics. The study compiles 23 years of data from 315 state and local public pension systems in the United States, showing that the total public pension debt now stands at $1.48 trillion at the end of 2024, the most recent year with complete data available. Most of the pension debt, $1.29 trillion, is owed by state governments. Overall, state and local governments have only 79% of the funds needed to fulfill pension promises made to public workers. With $15,804 in pension debt per person, Illinois has the highest unfunded pension liabilities per capita, the study finds. Connecticut has the second-most public pension debt per capita at $10,151, and six other states have public pension debt exceeding $8,000 per person: Alaska, Hawaii, New Jersey, Mississippi, New Mexico, and Kentucky.

In addition to debt and funded ratio information, the report also incorporates the latest market outcomes to estimate 2025 funding measurements. It finds that these metrics are expected to improve over the next year, but a major recession could add more than $1.2 trillion in unfunded liabilities nationwide and undo the funding progress most pension systems have made over the last 15 years. The study also presents other useful measurements on annual costs and investment performance to help understand the challenges facing public pension systems today. The interactive tool is available here. An overview of the findings, snapshots of state debt and funded ratios, and plan-level debt and return rate information are here: 

Report and Webinar: State and local pension plans have $1.48 trillion in debt 
Study: Illinois, Connecticut, Alaska, Hawaii, New Jersey and Mississippi have the most per capita pension debt
Study: The public pension plans with the most debt, best and worst investment return rates

California Faces a Pension Bill that Would Expose Taxpayers to More than $9 Billion in Additional Costs

In 2012, then-California Gov. Jerry Brown signed the Public Employees’ Pension Reform Act (PEPRA), which established much-needed limits on what California’s local governments could promise in pension benefits to public workers. Those public pension reforms are estimated to have already saved the state more than $5 billion and would likely save at least $25 billion over the next decade, but only if lawmakers stay the course and reject recent efforts to undo PEPRA. A new Reason Foundation explainer details how a proposed piece of legislation (Assembly Bill 1383) would undermine the landmark pension reform and could generate more than $9 billion in additional costs for the state’s already underfunded pension system, adding a significant burden to California’s already stretched taxpayers.

How Government Workforce Reductions Can Impact Public Pension Debt

Government shutdowns, hiring freezes, and a growing focus on reducing the size of government are slowing the growth of the public employee workforce in many states. Lawmakers and government administrators should be aware that this could have a negative impact on public pensions if assumptions are not adjusted, warn Reason Foundation’s Steve Vu and Zachary Christensen. Considering the shifting climate in government employment, it is an appropriate time to reevaluate the assumptions used to project the growth of these workforces to avoid surprise costs for taxpayers decades down the road.

News in Brief

AI Familiarity Linked to Higher Retirement Planning Confidence Among Public Employees

A new study from MissionSquare Research Institute explores how the adoption of artificial intelligence (AI) in state and local government workplaces influences employee engagement with retirement planning. Based on a Jan. 2025 survey of 2,000 public employees, the report finds that those who use AI at work are more than twice as likely to use it for retirement planning (57% vs. 26%). Comfort with AI is a strong predictor of interest in employer-provided AI retirement tools: 82% of employees already comfortable with AI express interest, compared with just 15% of those not at all comfortable. Income also matters—employees earning over $100,000 show 116% higher odds of interest than lower-income peers. The employees most engaged with AI are also most likely to work with financial professionals (72% vs. 15%). Read the full study here.

Quotable Pension Quotes 

“The market is running really hot right now. … It’s been good for us, but it won’t always be this good.”
—North Carolina State Treasurer Brad Briner quoted in “Could NC pension fund management changes mean COLAs for retirees?,” News From The States, Oct. 7, 2025.

“If you go back to what happened in 2024, 2023, the cities and counties said, we can’t pay more. These same cities and counties, when you talk about first responders, the majority of them are county and city employees. So, this cost is going to fall back on the cities and counties.”
— Mississippi State Sen. Daniel Sparks quoted in “First responders ask lawmakers to create separate retirement plan,” WLOX, Oct. 2, 2025.

Data Highlight

Reason Foundation’s Annual Pension Solvency and Performance Report provides an interactive funding history of the nation’s public retirement plans. The data dashboard shows if your state is on track to fulfill pension promises made to public workers and previews where these funding measurements would move under various levels of market stress. See the full interactive report here.

Reason Foundation in the News

“We should just be honest about why they raised it to 7.25% […] They did it because they have no money and they didn’t want to make the payments to the pension system. I’m sure the actuaries have justification for raising the assumed rate of return, but let’s be honest.”-Reason’s Ryan Frost, quoted in “Fiscal Fallout: Washington’s pension system gamble,” The Center Square, Sept. 17, 2025.

The post Pension Reform News: Reason’s annual report finds $1.5 trillion in aggregate pension debt appeared first on Reason Foundation.

Source: https://reason.org/pension-newsletter/reasons-annual-report-finds-1-5-trillion-in-aggregate-pension-debt/