Key Takeaways
- The median funded ratio of U.S. local government (LG) pensions rose to 83% in fiscal 2025 from 80% in fiscal 2024, spurred by strong market returns, contribution discipline, and recent benefit reforms.
- While pension and retiree medical liabilities are declining per capita, costs continue to rise as a percent of revenues as issuers address higher costs and reduce contribution deferrals seen in the past.
- Although funded ratios are on a positive trajectory, challenges in long-term fiscal sustainability include increasing market risk, aging populations, tightening budgetary flexibility, and political pressure to increase benefits.
In this report, S&P Global Ratings excluded rated entities for which it does not yet have fiscal 2025 pension data, so changes in 2025 metrics are likely on receipt of all finalized data. Similarly, for entities in cost-sharing plans where 2025 pension data is available, but their proportionate share is not, we used the 2024 proportionate share to achieve a reasonable estimation.
23-Sep-2026 | 10:43 EDT