The markets giveth, and the markets taketh away. Unfunded liabilities for state pension funds are expected to climb from $783 billion in 2021 to $1.3 trillion in 2022. That would mean the funded ratio of state pensions would fall from 85 percent last year to 75 percent in 2022.

That's according to the Reason Foundation, which projects that after the market expansion of 2021 helped pensions, the rather lackluster performance of markets this year could see an average rate of decline in state pensions' assets of 6 percent. Should that be the case, the Reason Foundation estimates that some of the nation's largest pension funds—California, New York, Texas, Ohio, Florida, and Illinois—would see their unfunded pension liabilities jump by more than $20 billion compared with 2021.

"The nation's largest public pension system, the California Public Employees' Retirement System [CalPERS], provides a good example of how much one bad year of investment returns can significantly impact unfunded liabilities, public employees, and taxpayers," write Zachary Christensen and Jordan Campbell of the Reason Foundation's Pension Integrity Project. "If CalPERS' investment returns come in at minus 6 percent for 2022, the system's unfunded liabilities will increase from $101 billion in 2021 to $159 billion." That would equal a debt burden of $4,057 for every Californian. The pension's funded rate would drop from 82.5 percent to 73.6 percent in 2022, and state employers would have less than three-quarters of the assets they need to pay for pensions already promised to workers.