Better market performance during June 2023 increased the estimated funded status of the 100 largest U.S. public pension plans from 73.7% as of May 31, 2023, to 75.8% as of June 30, 2023, as measured by the Milliman 100 Public Pension Funding Index (PPFI). While monthly market performance has been fairly volatile over the past 12 months, the funded status as of June 30, 2023 (75.8%), is modestly higher than it was as of June 30, 2022 (74.0%). This represents positive news for the many plans with June 30 fiscal year-ends.
Figure 1: PPFI funded ratio
During June 2023, the deficit between the estimated assets and liabilities shrank from $1.590 trillion at the beginning of the month to $1.467 trillion at the end of the month. In aggregate, we estimate the PPFI plans experienced investment returns of 2.9% in June, with individual plans’ estimated returns ranging from 1.0% to 5.2%. The Milliman 100 PPFI asset value increased from $4.465 as of May 31, 2023, to $4.603 trillion as of June 30, 2023. During June, the plans gained market value of approximately $147 billion, which was offset by a 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 $6.070 trillion as of June 30, 2023, up from $6.055 trillion as of May 31, 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 one plan above the 90% funded mark as of June 30, 2023; now, 17 plans stand above this benchmark compared to 16 as of May 31, 2023. Meanwhile, at the lower end of the spectrum, one plan moved above the 60% funded mark, bringing the total number of plans under this mark to 23, down from 24 as of May 31, 2023.
Figure 4: Funded ratios at June 30, 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 June 30, 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.