Cities and states can no longer afford the unsustainable retirement promises made to millions of government workers over the last 50 years. Total unfunded liabilities of state and local public pensions are now at $1.59 trillion, almost the size of Italy’s economy. Taxpayers are technically on the hook.

A new report from the Reason Foundation on Pension Solvency finds:

• • • The total unfunded liabilities in 2023 was $1.59 trillion, with $1.41 trillion (88% of the total) held by state plans and $188 billion (12% of the total) held by local plans.
    • The national aggregate funded ratio in 2023 was 76% and the median funded ratio was 76%. The median state plan was 78% funded, while the median local plan was 70% funded.
    • Stress testing results indicate that a recession could double unfunded liabilities, rising from the forecasted $1.31 trillion in 2024 to $2.71 trillion in 2025.

So far this century, the average annual return on public pension investments has been 6.5%–well below what plans had assumed.

The obvious solution is to convert all pension plans from defined benefit to defined contribution plans – i.e., a 401k plan. Almost no private sector workers still have antiquated defined benefit plans – although the Longshoremen wanted a DB plan. Only government workers get these guaranteed benefits and taxpayers in states like California and New York are getting fleeced.