2021 Update: Public Plan Funding Improves as Workforce Declines

[Jean-Pierre Aubry]

The brief’s key findings are:

• The aggregate funded ratio improved from 73 to 75 percent from FY 2020 to 2021. At the same time, contribution rates rose from 21 to 22 percent of payrolls.
• While initial expectations for public pensions were low due to COVID, financial markets rebounded and municipal tax revenues were quite resilient.
• Yet one other COVID-related factor – cuts to the state and local workforce – impacted public pension finances in FY 2021.
• These cuts had little impact on funded status and required contribution amounts, but they do explain the rise in contribution rates, which are expressed as a share of lower payrolls.