Allegheny County Joins Long List of States Shouldering Massive Unfunded Worker Pensions  

Labor Landscape

Allegheny County, long beset by budget woes, faces a $1.4 billion hole in its pension fund, according to a report released last month.  In an analysis commissioned by the Allegheny County Retirement Board, SME Consulting warned that fund only contains only 40 percent of the money it needs to pay out benefits owed to current and future retirees.  

“We, for the last 20 years, haven’t put in enough money to decrease the deficit,’’according to county Treasurer Erica Rocchi Brusselers. 

Officials will need to contribute an estimated $100 million to the fund each year for the next 20 years to fulfill its financial obligations. Without intervention, the pension fund would be insolvent by 2043, according to the report.  

“They are going to have to look at a variety of options to get back on track,’’ said Robert Strauss, a professor of economics and public policy at Carnegie Mellon University. Some of those options include property tax increases, a new countywide sales tax or a payroll tax on employees. For example, at 0.2 percent, a payroll tax on employees could generate $101 million annually.  

And the county has a short leash to accomplish the task of properly funding its worker pensions. Armstrong County Common Pleas Senior Judge Kenneth Valasek ruled recently that Allegheny County was legally required to keep its pension system actuarially sound.  (Allegheny County judges are recused from cases in which thy have an interest, such as the pension system that serves them, and outside judges are brought in.) 

Valasek gave Allegheny County and Pennsylvania state officials 12 months to come up with a solution, but finding that money could affect nearly everyone who lives, works and spends money in the county.  

But Allegheny County is not alone with its pension battles. Nationwide, 47 of the 50 states had unfunded pensions in 2024, according to  Reason Foundation’s  

Annual Pension Solvency Report. The study shows that 23 states each had over $20 billion in unfunded pension liabilities at the end of 2024, the latest year data was available.   

Two states had more than $200 billion in public pension debt: California ($ 265 billion in unfunded  liabilities and Illinois with ($201 billion in unfunded pensions). Two other states reported more than $90 billion in unfunded  pension liabilities: Texas ($92.2 billion) and New Jersey ($92 billion). Unfunded liabilities exceeded $60 billion in two additional states: Pennsylvania ($67 billion) and Ohio ($61 billion).  

The data also shows that 14 states have more than $30 billion in unfunded liabilities, including Massachusetts ($44 billion), Florida ($44 billion), New York ($45 billion), Kentucky ($40 billion), Conneticut ($37 billion), Michigan ($36 billion), Georgia ($33 billion), and Maryland ($31 billion).   

Tennessee, Washington and South Dakota are the only three states that did not report any aggregate unfunded pension liabilities at the end of 2024.   

Pension experts argue that the $1.3 trillion debt across more than 5,500 state and local pension plans will not disappear overnight. Existing state law and legal protections can limit what reforms states are able to enact.   

John Rush, a retired finance analyst from Washington, Pa., is quick to point out that some states provide protection for pension plans in their state constitutions, while others treat them as contracts protected by state and federal law. “These limitations, in combination with rising cost of living over time and longer lifespans for pension recipients, indicate that more rigorous efforts are needed to close the unfunded liability gap,’’ Rush said.     

Of the more than 10 million workers who participate in multiemployer pension plans, approximately one million are in plans that will be unable to pay out full benefits because they are not properly funded, according to the Pew Research Center.  

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