State Public Pension Funding Shortfall Hit $1.1 Trillion

U.S. state public pension systems unfunded liabilities increased by 17 percent in fiscal 2015 to $1.1 trillion, largely due to the failure of investment returns meeting expectations, a study by the Pew Charitable Trusts showed on Thursday.

"In aggregate, the funded ratio of these plans dropped to 72 percent in 2015, down from 75 percent in 2014," the study said, noting that median overall returns of 3.6 percent were less than half the long-run investment return assumption of 7.6 percent.

Poor investment performance was the largest contributor - $125 billion - to pension plans bearing a $157 billion increase in the net pension liability. This is the difference between the value of pension benefits owed to current and retired employees or dependents and the plan assets on hand.

"Even if investments had yielded the expected returns, however, overall state pension debt still would have grown by about $30 billion," the study said.

Pew noted that the $30 billion figure comes mainly from three factors: