As governments deal with paying for Covid-19 expenses amid falling tax revenue and shrinking budgets, there’s another big bill waiting for them: pension debt.

And many could lean on taxpayers to help.

Pension plans haven’t released their annual earnings yet, but a recent report from Moody’s Investors Service notes that “investment returns…have almost certainly fallen well short of targets.”

The ratings agency estimates that when pension plans tally up their total performance between July 1, 2019 and June 30 of this year, most systems will post returns in the range of 0% to 1%. This is considerably below their annual return targets of around 7%.

This makes two straight years of pension systems missing their targets, although last year it was just narrowly. In 2019, plans with more than $1 billion in assets earned a median return of 6.79 percent for the fiscal year ending June 30, according to the firm Wilshire Trust Universe Comparison Service.

When plans miss their targets, pension systems’ unfunded liabilities — or debt — increases unless governments raise their own annual payments into the system to fill the gap. Moody’s estimates that government pension bills next year could increase by 15%, just to keep their funding levels even.

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