A marginal decline in market performance during May 2023 lowered the estimated funded status of the 100 largest U.S. public pension plans very slightly, from 74.8% as of April 30, 2023 to 73.7% as of May 31, 2023, as measured by the Milliman 100 Public Pension Funding Index (PPFI). May marks the eighth month in a row where the funded ratio has stayed within the fairly narrow range of 70% to 75%. The relative stability stands in marked contrast to the period from March 31, 2020, through September 30, 2022, when the funded ratio climbed from 66.0% to 85.5% and then fell back to 69.8%.
Figure 1: PPFI funded ratio
During May 2023, the deficit between the estimated assets and liabilities increased from $1.524 trillion at the beginning of the month to $1.590 trillion at the end of the month. In aggregate, we estimate the PPFI plans experienced investment returns of -1.0% in May, with individual plans’ estimated returns ranging from -1.8% to -0.3%. The Milliman 100 PPFI asset value decreased from $4.517 trillion as of April 30, 2023 to $4.465 trillion as of May 31, 2023. During May, the plans lost market value of approximately $43 billion, on top of net negative cash flow of approximately $9 billion.
Figure 2: PPFI investment returns
The total pension liability (TPL) continues to grow and stood at an estimated $6.055 trillion as of May 31, 2023, up from $6.041 trillion as of April 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
May’s minor market decline pushed one plan below the 90% funded mark as of May 31, 2023; now 16 plans still stand above this benchmark compared to 17 as of April 30, 2023. 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 24.
Figure 4: Funded ratios at May 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 May 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.