⚠️ $55.8 Billion in Promises They Can't Cover
The Commonwealth's net position is negative $60.2 billion — total liabilities exceed total assets
Teachers' pension (MTRS) is only 60.4% funded — for every dollar promised, only 60 cents exists
Annual pension appropriation: $4.1B → $4.5B → $4.9B (FY24→26) — growing ~10%/year
OPEB (retiree healthcare) is 15.6% funded — $13.7B in promises backed by $2.5B in assets
Active-to-annuitant ratio: 1.3 workers per retiree — was 2.0 in 2001
PRIT Fund pays $520M+/year in management fees to 175+ external managers
Where the $55.8 Billion Shortfall Lives
SERS (State Employees)
$14.1B
72.5% funded · $37B assets
MTRS (Teachers)
$25.5B
60.4% funded · $39B assets
Boston Teachers
$2.6B
~61% funded
OPEB (Healthcare)
$13.7B
15.6% funded
MBTA Pension
$1.8B
~46% funded
Unfunded Liabilities by Category
Source: Commonwealth ACFR FY2024; MBTA Audited Financials FY2024
Funded Ratio by System
Source: PERAC 2024 Actuarial Valuations; ACFR FY2024
Taxpayer Cost Escalation
FY2024
$4.10B
Pension appropriation
Normal Cost (SERS)
$463M
Annual benefit accrual
ARC % of Payroll
18.3%
Up from 7.4% in 2001
Employer Pension Cost as % of Payroll (SERS), 2001–2024
Source: Public Plans Database (publicplansdata.org), PPD ID 50
Net State Deficit Trend (FY2015–2024)
Source: Commonwealth ACFR FY2015–FY2024
📋 What Does This Mean for Taxpayers?
When the state promises a pension, it must set aside money today to pay for it later. The "unfunded liability" is the gap between what's been promised and saved. Public pensions are constitutionally protected in Massachusetts and cannot be reduced. The $4.9B annual appropriation (FY2026) — roughly 8% of the entire state budget — goes to past promises, not current services. The triennial funding schedule resets for FY2027, and costs will continue climbing.
⚠️ Key Concerns
MTRS holds 60% of all unfunded pension liability — $25.5B of the $42.1B total
Assumed rate of return: 7.0% — lowered from 8.25% in 2012, but still aggressive
If actual returns fall short by 1%, unfunded liability grows by ~$4–5B
Both SERS and MTRS target full funding by FY2036 — less than 11 years away
Pension Systems Breakdown
State Pension Systems — 2024 Actuarial Valuation
| System | Total Liability | Plan Assets | Unfunded | Funded % | Members | Target |
|---|
| SERS | $52.0B | $37.9B | $14.1B | 72.5% | 90,988 active / 69,750 retired | FY2036 |
| MTRS | $65.8B | $40.4B | $25.4B | 60.4% | ~101K active / ~71K retired | FY2036 |
| Boston Teachers | — | — | $2.6B | ~61% | State share | — |
| MBTA | — | — | $1.8B | ~46% | Separate | — |
| TOTAL | $117.8B+ | $78.3B+ | $42.1B+ | | ~332K+ | |
Source: PERAC 2024 Actuarial Valuation Reports; ACFR FY2024; Mass Retirees Association
SERS Funded Ratio vs. National Average, 2001–2024
Source: Public Plans Database (PPD ID 50)
SERS Net Assets Growth ($B), 2001–2024
Source: Public Plans Database
Actual Returns vs. Assumed Rate (SERS)
Source: Public Plans Database; PRIT ACFR
Assumption Sensitivity: What If Returns Miss?
Source: ACFR FY2024 sensitivity disclosures (illustrative)
⚠️ The Assumed Rate of Return Problem
Since 2012, the assumed rate has been lowered from 8.25% to 7.0%. The PRIT Fund's 10-year return of 8.33% has beaten the assumption, but that includes exceptional post-COVID years. In FY2009, the fund lost 23.9%. In FY2022, it lost 2.95%. A prolonged downturn of even 1% below assumption adds $4–5B to the unfunded liability — equivalent to an entire year of extra taxpayer contributions.
PRIT Fund — The $105 Billion Master Fund
The Pension Reserves Investment Trust holds assets for SERS, MTRS, Boston Teachers, and ~66 local systems that invest with PRIM.
Total PRIT Assets
$105.3B
FY2024 (June 30, 2024)
FY2024 Return
9.9%
9.5% net of fees
Net Income
$9.1B
5 of 7 asset classes beat benchmarks
5-Year Return
9.17%
vs. 7.0% assumed
10-Year Return
8.33%
Beating 7% target
Since Inception
9.36%
40-year annualized (1985–2024)
PRIT Asset Allocation (FY2024)
Source: Public Plans Database; PRIT ACFR FY2024
Allocation Shift: 2001 → 2024
Source: PPD — note PE tripled from 5.6% to 17.0%
Annual Returns vs. 7% Target, 2001–2024
Source: Public Plans Database (PPD ID 50)
FY2024 Returns by Asset Class (Net)
Source: PRIT ACFR FY2024/2025
Management Fees & Costs
FY2025 Budget
$559M
52.6 bps of AUM
FY2026 Budget
$604M
52.2 bps of projected $116B
Fee to Managers
~90%
Of budget = external manager fees
External Managers
175+
Private firms managing public money
💰 Fee Transparency
PRIM's budgeted fees ($604M for FY2026) exclude performance fees, incentive fees, and carried interest — which are "extremely difficult to estimate." Private equity (17% of fund) and hedge funds (8.3%) carry the highest fee structures. The true all-in cost is significantly higher than the reported 52 bps. That said, PRIM's PE portfolio has consistently ranked in the top 5 nationally, and the fund's since-inception return of 9.36% significantly beats the 7% target.
The Demographic Time Bomb
Fewer active workers supporting more retirees, with negative cash flows every single year since at least 2001.
Active Workers (SERS)
90,988
Contributing members
Retirees & Beneficiaries
69,750
Collecting benefits
Total Membership
197,928
Including inactive vested
Actives per Annuitant
1.3
Down from 2.0 in 2001
FY2024 Cash Flow
-$764M
More paid out than taken in
Active Workers per Retiree (SERS vs. National), 2001–2024
Source: Public Plans Database — national averages weighted by plan size
Annual Net Cash Flow (SERS, $M) — Benefits Paid Minus Contributions
Source: Public Plans Database — negative = paying out more than taking in
⚠️ Why This Matters
In 2001, 2.0 active workers paid into SERS for each retiree. Now it's 1.3-to-1 — a 35% decline.
SERS has had negative cash flow every year — paying out $764M more than it took in during FY2024.
The fund depends entirely on investment returns to cover the gap — a bad market year compounds fast.
The national ratio has dropped to 1.2-to-1 — Massachusetts started the decline earlier and faster.
SERS Cash Flow History
| Year | Cash Flow ($M) | Assets ($B) | CF/Assets |
|---|
| 2007 | -$570 | $21.9B | -2.6% |
| 2010 | -$344 | $17.0B | -2.0% |
| 2014 | -$717 | $23.9B | -3.0% |
| 2018 | -$748 | $28.0B | -2.7% |
| 2021 | -$760 | $36.0B | -2.1% |
| 2024 | -$764 | $37.9B | -2.0% |
99 Municipal Pension Systems
PERAC oversees 99 city, town, county, and district systems plus 6 state systems. Data from PERAC's January 1, 2025 Funded Ratio List.
Municipal Unfunded
$15.2B
99 systems (FY2023)
All 105 Systems
$43.4B
State + municipal
Median Funded Ratio
75.3%
Up from 73.6%
Fully Funded
4
Of 99 municipal systems
Legal Deadline
FY2040
G.L. c. 32, §22F
Municipal Systems by Funded Ratio Category
Source: PERAC January 1, 2025 Funded Ratio List
Assumed Rate of Return Distribution
Source: PERAC Jan 2025 — median ARR is 7.0%
Notable Municipal Systems
| System | Status | ARR | Notes |
|---|
| 4 Fully Funded Systems | 100%+ | Varies | Best in state |
| Salem | +6.3pp YoY | — | Largest improvement |
| Plymouth County | — | 7.88% | Highest ARR in state |
| Leominster | -18.1pp YoY | 5.50% | Worst decline; lowest ARR |
⚠️ Municipal Risks
The most common full-funding target is 2035 — pushed out two years from prior year. Municipalities with low funded ratios face annual pension assessments consuming a growing share of operating budgets, crowding out police, fire, schools, and infrastructure. The wide variance (Salem +6.3pp vs. Leominster -18.1pp in one year) shows how volatile individual systems can be.
OPEB — Retiree Healthcare: The Other Crisis
State OPEB Liability
$16.2B
Total promised
State OPEB Assets
$2.5B
Saved so far
State Funded %
15.6%
84¢ of $1 doesn't exist
Statewide Total
$56.1B
All entities combined
Statewide Funded %
5.9%
$3.3B for $56.1B owed
⚠️ OPEB: Far Worse Than Pensions
Statewide OPEB liability: $56.1 billion — only 5.9% funded
Municipal OPEB: $5.0B across ~220 districts, 14.4% funded
70% of regional systems have NO OPEB trust fund — fully pay-as-you-go
327 of 351 communities (93%) carry OPEB obligations
Healthcare costs inflate 5–7% annually — far outpacing general inflation
Component units (MBTA, authorities) carry $2.9B additional OPEB
Funded Ratios: Pensions vs. OPEB
Statewide OPEB Summary
| Category | Liability | Assets | Unfunded | Funded % |
|---|
| State (SRBT) | $16.2B | $2.5B | $13.7B | 15.6% |
| Municipal (~220) | $5.0B | $716M | $4.2B | 14.4% |
| All Entities | $56.1B | $3.3B | $52.8B | 5.9% |
Source: PERAC OPEB Summary (May 2024); ACFR FY2024
How Massachusetts Compares
Pension Funded Ratios — MA vs. Selected States
Source: Public Plans Database; individual state ACFRs
MA SERS vs. National Avg, 2001–2024
Source: Public Plans Database
📋 Context
National aggregate funded ratio: 76.7% (FY2024). MA SERS (72.5%) is below average; MTRS (60.4%) is significantly worse. States like Illinois, NJ, and Kentucky have worse pension funding overall. But Massachusetts stands out for: (1) the sheer size of teachers' unfunded liability, (2) abysmal OPEB funding (5.9% statewide), and (3) the escalating annual cost ($4.9B FY2026). On the positive side, the Commonwealth has made its full ARC since FY2015.
Data Sources
| Source | Data Used | Date |
|---|
| Commonwealth ACFR FY2024 | Net position, pension/OPEB notes, bonded debt | Apr 2025 |
| PERAC Actuarial Valuations (2024) | SERS/MTRS funded ratios, liabilities, membership | Fall 2024 |
| PERAC Jan 2025 Funded Ratio List | 99 municipal funded ratios, ARR, schedules | Jan 2025 |
| Public Plans Database (PPD #50) | 23-year SERS time series: assets, returns, ARC, demographics | FY2024 |
| PRIT Fund ACFR FY2024 | Total assets, returns, allocation, fees | Dec 2024 |
| PRIM FY2026 Operating Budget | Fee projections, asset class costs | May 2025 |
| Mass Retirees Association | MTRS details, funding schedule amounts | Dec 2024 |
| PERAC OPEB Summary Reports | Statewide OPEB liabilities by entity | May 2024 |
| DLS/Mass.gov Analysis | Municipal funded ratio analysis | Feb 2025 |