The issues facing public pension funds in the US are widely known, and while it’s not clear how exposed to the recent market correction funds were, analysis from Wirepoints of 2018 data shows some may have reached the point of no return.

Looking at asset-to-payout ratios of 148 state and local pension funds with more than US$2 billion in assets, the worst-off funds are those that are already well known for their pension shortfalls. These are in Kentucky, Illinois, New Jersey and Connecticut.

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Using the asset-to-payout ratio, a measure used by Moody’s to measure pension funds’ health, Wirepoints determined some funds had assets equal to just a few years’ worth of benefits.

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In contrast, the strongest funds had assets equal to 20 years or more of payouts before COVID-19 hit, with some over 40 years. The strongest fund, DC Police & Fire, is 114% funded and has an asset-to-payout ratio of 54.8 years.

Kentucky’s Employee Retirement System ranks as the weakest fund, with just 2.5 years of assets to fund benefits.

According to Kentucky’s Bluegrass Institute for Public Policy Solutions chair Aaron Ammerman, this particular fund is at a level no public pension has ever recovered from.

Other funds in the state are in a similarly tight spot, with both county-level and teacher funds with less than 10 years’ worth of payouts left. Illinois looks to be the state in the most trouble, with six of its funds ranking among the 15 weakest in the nation.

Three funds are at the state-level, the other three are Chicago-based and all looked able to sustain just eight years or less in payouts two years ago.

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