25 biggest public pension funds face $2 trillion shortfall

The 25 largest U.S. public pensions face about $2 trillion in unfunded liabilities, showing that investment returns can’t keep up with ballooning obligations, according to Moody’s Investors Service.

The 25 biggest systems by assets averaged a 7.45 percent return from 2004 to 2013, close to the expected 7.65 percent rate, Moody’s said in a recent report. Yet the New York-based credit rater’s calculation of liabilities tripled in the eight years through 2012, according to the report.

In Hawaii, the state Employees’ Retirement System fund is in the early stages of playing catch-up with its future pension obligations after being only 60 percent funded — a shortfall of $8.49 billion — as of June 30, 2013. 

The ERS fund has averaged a 7.6 percent return over the past 10 years. Its annual target, which has been altered slightly over the years, is now 7.75 percent.