State and local pensions just hit a turning point nobody announced

Every state and most local governments run the same machine: teachers, firefighters, clerks, and troopers pay into a trust fund for decades, and the fund pays their pensions back out for decades more.▸ It is the largest pool of retirement money in the country outside Social Security — more than 37 million people had a stake in it in 2025 — and for twenty-two years running, the machine's core ratio, working members to retirees, only moved one direction: down. 2024 was the first year it didn't.

Public pensions are pre-funded, not pay-as-you-go: workers and employers contribute every paycheck, and the money is invested for years before it becomes a benefit check.▸ In 2025, state and local governments invested $315.02 billion in these trust funds — employees paid 24.83% of that out of their own paychecks, governments contributed the remaining 75.17% on their behalf — and the funds paid out $418.25 billion in benefits to retirees, survivors, and dependents, up 3.4% from $404.46 billion the year before.

Contributions alone covered about 75 cents of every benefit dollar paid in 2025 ($315.02B / $418.25B).▸ The "Investment earnings & other income" flow in the chart isn't a separate Census line item — it's the $103.23 billion gap between total contributions and total benefit payments, both figures reported directly, made up by returns on the $6.49 trillion already sitting in these funds, which grew 8.46% for the year. That gap between contributions and benefits isn't a crisis by itself — it's how a pre-funded system is supposed to work, drawing down investment gains to help pay retirees so that today's workers aren't directly paying for yesterday's. It only becomes a problem if the fund behind it doesn't have enough assets to cover what it's promised.

That's the other number.▸ Across the 129 largest state and local pension plans — covering nearly 90% of the entire state and local defined-benefit community — actuaries value what's owed to current and future retirees, then compare it to what's actually been saved.

At the end of fiscal 2024, per the NASRA Public Fund Survey, plans held $4.94 trillion in actuarial assets against $6.45 trillion in accrued liabilities — a $1.51 trillion gap.▸ The aggregate funded ratio was 76.7%, up from 75.7% the year before, driven mainly by strong investment returns. It's real progress, but it's progress against a hole two decades in the making: at the median plan, funded status still ranges from 28% to 108% depending on the state.

The dollar side of this story has been told for years.▸ The people side changed direction in fiscal 2024, and it changed for a structural reason, not a lucky one.

For every year the survey has run since FY02, the number of retirees drawing a check grew faster than the number of workers paying in — the natural result of an aging public workforce.▸ In FY24, that reversed for the first time: active members grew faster than annuitants, and the active-to-annuitant ratio ticked up from 1.25 to 1.26. Behind the shift are two separate currents — annuitant growth has been slowing for nine straight years as older cohorts of retirees pass on, while state and local government hiring has picked up since 2022, per Bureau of Labor Statistics employment data cited in the survey. The ratio is still historically low: a shrinking base of workers is still amortizing that $1.51 trillion gap. But for the first time in the survey's history, it stopped shrinking.

Dollar and membership figures for the funding gap and worker-to-retiree ratio come from NASRA's Public Fund Survey, which covers 129 of the largest state and local plans (nearly 90% of the community by membership and assets) — not all roughly 37 million people with a stake in some state or local pension plan nationwide, per the Census Bureau's broader, separately sourced count.