Public Pensions Contend with Falling Markets and Rising Inflation

The brief’s key findings are:

• FY 2022 has been hard for state and local pension plans, with large investment losses and rising outlays due to inflation.
• The aggregate funded ratio fell from 78 percent to 74 percent, negating much of the gains from the previous year.
• The impact of rising inflation on pension finances, though, has been muted by limits to plans’ cost-of-living adjustments (COLAs).
• However, the flip side of limited COLAs is less inflation protection for retirees, especially those not covered by Social Security.