Public pension debt rankings for state and local governments

Most retirement systems providing defined benefit pensions and retiree health care to state and local government employees are underfunded—meaning they lack sufficient assets to cover the retirement benefits legally promised to public employees. In 2023, the national aggregate funded ratio for public pensions was 76%, excluding unfunded health and lifestyle benefits, which now surpass pension debt.

This escalating issue has become a significant fiscal concern for state and local governments and their taxpayers. Many governments face unfunded liabilities for employee-related benefits that compound at high interest rates, jeopardizing employee retirement security and fiscal stability. Public employee retirement benefit debt forms when governments fail to allocate necessary funds to pension and retiree healthcare plans. 

Aiming for full funding is critical. Public pension benefits are generally legally guaranteed and shielded by multiple layers of constitutional protections. And while retiree health care benefits generally enjoy less legal protection in most of the country, there are strong moral and political pressures to ensure that promises made to previous generations are kept.  

This article shares figures revealed by the Reason Foundation’s Debt Trends for State and Local Governments, a project to aggregate municipal financial statements to shed light on and compare the financial positions of states, cities, counties, and school districts.

Unfunded public employee retirement benefits 

This is defined as a governmental entity’s sum of unfunded portion of pension benefits obligations (Net Pension Liability) and unfunded portion of other post-employment healthcare benefits (Net OPEB) owed to its public employees, as reported in their audited annual comprehensive financial reports (ACFR). 

Attributing guilt to administrations or governmental units requires care. Municipal entities often lack control over their retirement systems’ investment performance and contribution rates. Many participate in large state-run multi-employer retirement plans, with such arrangements often leaving limited control over investment outcomes, contributions, and unfunded amounts for school districts and local municipalities.  

However, despite the need for careful consideration, public employee debt is a critical issue at all levels of government. Unfunded obligations expose municipalities to significant financial risks, constraining their ability to provide essential services, issue bonds, and invest in infrastructure development.  

Taxpayers are exposed to more than just the public employee benefit debt of a single municipality. A more accurate picture would require adding the public employee debt of all overlapping government entities—including school districts, counties, cities, and states.  

These values are for the fiscal year 2022, the most recent year with full data available for all entities.  

States: Public pension debt rankings  

Illinois, New Jersey, and California have the most unfunded employee retirement benefits​.

On a per capita basis, New Jersey ranks first, followed by Connecticut in second—which sits sixth in the total ranking. 

Vermont and Hawaii did not make the top 10 total debt ranking but made the per capita ranking, suggesting that while these states may not have the largest overall employee debt, their smaller populations face a higher employee debt burden per resident.

The opposite is true for Texas and New York, which rank high in total unfunded employee retirement benefits but are absent from the top 10 per capita ranking.  

The most populous state in the country, California, drops from third place in total unfunded liabilities to tenth in per capita debt.

Six states—Washington, Wisconsin, Oklahoma, Nebraska, Utah, and South Dakota—declared having set aside more assets than the estimated value of their retirement obligations.  

Cities: Public pension debt rankings  

New York and Chicago lead in both rankings for cities with the highest public employee retirement debt, whether measured by total liabilities or on a per capita basis. 

Yonkers, Worcester, Rochester, Jersey City, and Buffalo did not make the top 10 total debt rankings but made the per capita ranking pension debt rankings, suggesting that while these states may not have the largest overall employee debt, their smaller populations face a higher employee debt burden per resident.

The opposite is true for Phoenix, Houston, San Jose, Fort Worth, and San Diego, which rank high in total unfunded employee retirement benefits but are absent from the top 10 per capita pension debt ranking.  

Eight cities report negative public employee benefit debt, meaning they have set aside more assets than the estimated value of their retirement obligations. These cities are Fresno, Spokane, Chula Vista, Riverside, Madison, Plano, Wichita, and Santa Clarita.

Counties: Public pension debt rankings 

Los Angeles County, Cook County, and Philadelphia have the highest total unfunded employee retirement benefits​.

On a per capita basis, the most indebted counties are Nassau County, Philadelphia, and Baltimore County. Please see the technical notes below regarding the debt of Philadelphia, Honolulu, and some other entities.

Baltimore County, Westchester County, and Jacksonville did not make the top 10 total debt ranking, but they did make the top ten per capita ranking, suggesting that while these states may not have the largest overall employee debt, their smaller populations face a higher employee debt burden per resident.

The opposite is true for Miami-Dade County, Santa Clara County, and Harris County, which rank high in total unfunded employee retirement benefits but are absent from the top ten per capita ranking.

All 10 counties with the least public employee benefit debt report negative liabilities, indicating they have set aside more assets than needed to cover their retirement obligations. 

For more information:

Overview of Government Financial Transparency Project: State and local debt trends 2020-2020

State debt: California, Illinois, New York, New Jersey and Texas each have over $200 billion in total liabilities

County debt: Los Angeles, Philadelphia, Denver, Miami-Dade and Cook counties among worst in nation

City debt: New York has more than four times the liabilities of Chicago, Los Angeles, Houston and other cities

Technical Notes 

1. The Debt Trends for State and Local Governments project limits its analysis to the 100 most populous municipalities, counties, and school districts in the United States—in addition to all U.S. states. The full list can be found here. 

2.  The numbers reported here have been extracted from each unit’s Annual Comprehensive Financial Reports (ACFR) for fiscal year 2022 (the most recent year that municipal government entities have comprehensively reported). We are collecting fiscal year 2023 data and plan to release a comprehensive update early in 2025. 

3.  To accurately represent fiscal implications, population numbers used to calculate per capita calculation for cities and counties represent the population size, not the number of covered employees. Values have been extracted from the 2020 census.

4. Several entities in this analysis are cities that have consolidated their operations and financial reporting with the overlapping county. Effectively, these jurisdictions are merged into a single administrative entity. These consolidated governments include Nashville-Davidson (TN), Jacksonville-Duval (FL), San Francisco, Honolulu, Denver, and Philadelphia. Due to their structure and financial reporting practices, these entities cannot be fairly separated into distinct city and county categories. These entities are included in the larger category of counties within this report because their geographic and jurisdictional boundaries match those of the formerly independent counties.