Charted: Top 5 States Hold 55% of U.S. Public Pension Unfunded Liability

A national average funded ratio of 82.5% sounds almost healthy — until you notice that $1.27 trillion of promised benefits still lack matching assets [Equable Jan 2026], and that a thin slice of states owns most of that gap. Equable Institute’s State of Pensions 2025 January update, read beside Boston College’s Center for Retirement Research (CRR) Public Plans Database path and Pew’s longer funding-gap series, shows a split map: seven jurisdictions at or above full funding, three states still below 60%, and a dollar shortfall that is highly concentrated.

The dashboard above answers two linked questions. First, what is the distribution of statewide funded ratios? Second, how concentrated is unfunded actuarial accrued liability (UAAL) — the dollar gap between assets and accrued benefits — in a handful of large systems? Toggle UAAL share, Funded bins, Funded × UAAL, and National path; filter by census region; rank by UAAL dollars or funded percent.

Scoreboard: funded ratio is not the same as UAAL

Funded ratio is assets divided by accrued liabilities. UAAL is the dollar remainder. A mid-sized state at 58% funded can look worse on the ratio chart than California at 84% — yet California’s $256B shortfall dwarfs Kentucky’s $36B because the liability base is so much larger [Equable Jan 2026]. Desks that only rank by percentage miss the fiscal geography of who actually owes the debt.

The concentration curve: top states own the shortfall

Order states by positive UAAL and stack their shares against Equable’s $1.27T national shortfall. The cumulative curve rises fast:

• California (~$256B) and Illinois (~$206B) together are about 36% of national UAAL.
• Add Texas, New Jersey, and Pennsylvania and the top five reach roughly 55%.
• The top ten clear about 70%.

That concentration is the headline for budget officers and rating desks. Improving the national average funded ratio can coexist with stubborn stress in a few large systems. Illinois sits at 54% funded with the second-largest dollar gap; New Jersey is near 60% funded with ~$86B UAAL; California’s statewide average is a more respectable 84%, but its absolute shortfall still leads the country because CalPERS, CalSTRS, and large municipal plans are enormous.

Texas illustrates the other side of the coin: an 82.5% funded ratio — right on the national average — still produces ~$87B of UAAL simply because the liability stock is large. Ratio and dollars answer different questions; both belong on the same dashboard.

Distribution: resilient, fragile, and distressed

Equable’s state averages (statewide plans plus large municipally managed plans with at least $1B of liabilities) spread across a wide band [Equable Jan 2026]:

• Resilient (≥90%): seventeen jurisdictions, including the fully funded set and strong systems in Minnesota, North Carolina, New York, Virginia, and others.
• Fragile (60–90%): the crowded middlemost of the map.
• Distressed (<60%): Mississippi (59%), Kentucky (59%), and Illinois (54%).

The histogram is not a neat bell curve. A cluster sits in the 80–90% bin near the national average, another cluster fills 90–100%, and a long left tail of distressed and near-distressed states pulls attention. CRR’s plan-level terciles sharpen the same story with a different cut: among major Public Plans Database plans in FY 2025, the top third aggregates near 95% funded, the middle third near 78%, and the bottom third near 58% [CRR IB 25-15]. State averages smooth over within-state plan gaps — California’s average hides both well-funded local public-safety plans and thinly funded legacy judge systems — but the tercile split confirms that “the average plan” is not the distressed plan and not the resilient plan.

Why national progress looks modest on the CRR ledger

Equable’s market/estimated path shows the national funded ratio rising from 78.0% in 2024 to 82.5% in 2025 as average investment returns (~9.5%) beat the typical assumed return (~6.9%) and contributions stayed high [Equable Jan 2026]. CRR’s actuarial aggregate for FY 2025 is lower — 77.7%, up only about 1.5 points since 2023 — because actuarial smoothing, liability growth, and mature-plan cash flows blunt the equity rally [CRR IB 25-15].

CRR’s July 2025 brief stresses the mechanics: liabilities still grow roughly 4% a year; mature plans run negative net cash flows near 2% of assets even when actuarially determined contributions are paid in full; and alternatives-heavy portfolios do not capture a pure equity index’s upside [CRR IB 25-15]. Those features explain why a 40%+ equity rally does not translate into a 40-point funding jump. Pew’s longer funding-gap work adds the policy layer: states that chronically undershot actuarially required contributions — historically including Illinois, Kentucky, and New Jersey — compounded interest on pension debt even when markets cooperated [Pew Funding Gap].

Together, the sources say the same thing in different dialects: fundamentals improved, but the stock of unpaid promises remains large, and geography still dominates.

Large liabilities, thin ratios: the scatter’s outliers

Plot funded ratio against UAAL and four archetypes appear:

1. High funded, low/negative UAALWisconsin, Washington, Tennessee, Nebraska, Utah, South Dakota, D.C. These systems are the resilience reference set.
2. Mid funded, huge UAALCalifornia and, to a lesser degree, Texas, Florida, New York, Ohio. Size, not ratio distress, drives the dollar gap.
3. Low funded, large UAALIllinois and New Jersey. Worst of both worlds for taxpayers.
4. Low funded, smaller UAALMississippi and Kentucky. Ratio stress is acute, but absolute dollars are smaller than the coastal and Great Lakes giants.

Region filters matter. The Northeast packs New Jersey, Pennsylvania, Connecticut, and Massachusetts into the fragile-to-distressed band with meaningful dollar gaps. The Midwest contains both Wisconsin’s surplus and Illinois’s hole. The South mixes Tennessee’s overfunding with Mississippi/Kentucky distress and Texas-scale UAAL. The West is California’s absolute-dollar story plus a long list of mid-80s funded systems.

Caveats and how to read the numbers

Treat every figure as a point-in-time estimate, not a cash-flow forecast:

• Equable’s 2025 state figures blend reported valuations with estimated investment returns for plans that had not closed their fiscal year when the January update was published.
• CRR’s actuarial funded ratios are not interchangeable with Equable’s market/estimated ratios; the ~five-point gap between 82.5% and 77.7% is methodology, not a contradiction.
• Statewide averages weight large plans heavily; a city plan can be far healthier (or weaker) than the state label.
• Assumed returns, amortization methods, and COLA rules differ across systems; a 1-point funded-ratio difference between two states can be smaller than an assumption difference.
• Overfunded states (negative UAAL) do not “cancel” underfunded states in a political senseassets are siloed by statute and trust.
• UAAL share percentages here use Equable’s $1.27T national shortfall as the denominator and positive state UAAL only; rounding and plan coverage (Equable covers the large majority, not every small local plan) mean shares are approximate.

What the map implies for 2026 budgets

Contribution rates near 30%+ of payroll on average are already a hard claim on general funds, school aid, and city budgets. Equable flags mounting structural budget gaps in dozens of states even without a recession. That environment raises the political pressure to pause the contribution discipline that helped lift funded ratios since 2022 — especially in states where UAAL amortization already crowds out other priorities.

For desks tracking fiscal risk, the useful cut is not “is the national average above 80%?” It is: which five states own half the dollar gap, which three remain under 60% funded, and whether contribution policy in those systems stays intact when revenues soften. The distribution has improved at the center; the concentration of unfunded liability has not dissolved.