Public pension funding levels have declined over the past two decades, yet stakeholders lack clear or comparable indicators of what has driven those changes or what the trend means for fiscal health. Although financial reporting reforms have aimed to improve transparency and visibility, actuarial reporting remains highly technical and embeds discretionary and political choices about assumptions and methods that shape how pension finances are represented. This article examines how actuarial valuation reports capture changes in unfunded liabilities and assesses the extent to which reporting practices clarify or obscure the drivers behind shifts in pension funding levels.
Using a comparative case study of Connecticut, Illinois, Kansas and Pennsylvania, we use a forensic analysis approach to decompose yearly changes in unfunded pension liabilities. Drawing on actuarial valuation reports and annual comprehensive financial reports, we adapt the Center for Retirement Research's forensic analysis approach to construct a dataset that tracks year-to-year changes in unfunded liabilities and attributes those changes to specific factors. We also examine how each system reports these changes, documenting variation in reporting categories, level of detail and consistency across years to assess how the financial and actuarial reports provide information to users of those documents.
The drivers of changes in unfunded liabilities vary across our case study states, complicating common narratives about the causes of pension underfunding. Assumption and methodology changes dominate in Connecticut, while in Illinois, sustained contribution shortfalls drive declines. In Pennsylvania, major legislative actions explain the erosion of its funding levels. Last, in Kansas, growth in unfunded liabilities was driven by capped contributions and assumption revisions. Across the four cases, reporting practices remain inconsistent and often obscure the factors underlying changes in pension funding levels.
This article reframes debates on pension underfunding by highlighting how actuarial reporting itself is a central and underrecognized driver of perceptions of fiscal health. We demonstrate that with shared interpretive standards, actuarial reporting constructs rather than clarifies pension system conditions, limiting the usefulness of funded ratios and other common indicators.
