A second consecutive month of positive market performance during July 2023 increased the estimated funded status of the 100 largest U.S. public pension plans from 75.8% as of June 30, 2023, to 76.8% as of July 31, 2023, as measured by the Milliman 100 Public Pension Funding Index (PPFI). The July 31, 2023, funded status now sits at the highest ratio since May of last year (78.4% as of May 31).
Figure 1: PPFI funded ratio
During July 2023, the deficit between the estimated assets and liabilities decreased from $1.467 trillion at the beginning of the month to $1.410 trillion at the end of the month. In aggregate, we estimate the PPFI plans experienced investment returns of 1.9% in July, with individual plans’ estimated returns ranging from -0.1% to 2.9%. The Milliman 100 PPFI asset value increased from $4.603 trillion as of June 30, 2023, to $4.675 trillion as of July 31, 2023. During July, the plans gained a market value of approximately $82 billion, which was offset by a net negative cash flow of approximately $10 billion.
Figure 2: PPFI investment returns
The total pension liability (TPL) continues to grow and stood at an estimated $6.085 trillion as of July 31, 2023, up from $6.070 trillion as of June 30, 2023. Just as pension assets grow over time with investment income and shrink over time as benefits are paid, so too does the TPL grow over time with interest and shrink as benefits are paid. The TPL also grows as active members accrue pension benefits.
Figure 3: PPFI funded status
The market rise pushed two additional plans above the 90% funded mark as of July 31, 2023; 19 plans now stand above this benchmark, compared to 17 as of June 30, 2023. Meanwhile, at the lower end of the spectrum, there were no changes in the number of plans below 60% funded, keeping the total number of plans under this mark at 23.
Figure 4: Funded ratios at July 31, 2023
About the Public Pension Funding Index
This update is an estimate based on Milliman’s 2022 Public Pension Funding Study and was updated for market returns from June 30, 2022, to July 31, 2023. The 2022 annual study encompasses adjustments made as of June 30, 2022, and reflects updated publicly available asset and liability information gathered for the annual study.