States' adjusted net pension liabilities totaled $1.25 trillion in fiscal year 2015 and are expected to increase a further $500 billion in the two next years, said a report Thursday from Moody's Investors Service.
In light of low fiscal year 2015 and 2016 returns, that figure is expected to rise over the next two reporting years, reaching an estimated $1.75 trillion in fiscal year 2017, said Marcia Van Wagner, Moody's vice president and senior credit officer, in a news release on the report.
State pension funds returned a median 3.2% in fiscal year 2015 and 0.52% in fiscal year 2016, compared to an average return assumption of 7.5%.
Moody's report also looked at pension contributions and whether states are contributing enough to stem unfunded liability growth.
States whose contributions exceeded the amount needed to halt unfunded liability growth included Michigan, North Carolina, South Dakota and Utah. States contributing below that threshold included Illinois, Kentucky, New Jersey and Texas.
The data in Thursday's report were based on new GASB 68 accounting rules and not directly comparable to earlier years, Moody's noted.