Public pensions performed better than anticipated during the pandemic, easing the financial strain on state and local governments sponsoring the plans, thanks in part to U.S. aid and stock market gains.

The massive federal stimulus has helped head off the dire revenue picture that many governments were facing early in the pandemic. At the same time, record stock market gains and past changes to public pension operations helped drive funded levels higher and push pension management down the list of concerns for state and local governments, at least for now, according to a report from Municipal Market Analytics.

As a result, aggregate funding levels for state and local pension funds increased to 74.7% from 72.8%, according to a June report from the Center for Retirement Research at Boston College. Without the aid, plans likely would’ve found themselves in a worse situation than after the 2008 recession. Now, they will likely have the money to make contributions both this year and next, MMA said.

“Public pensions have abated, for now, as a source of worry for state and local stakeholders,” the MMA report reads. “Boosted by past reforms and current stock market performance, pension systems are likely to post record investment gains and declines in unfunded liabilities for FY 2021, assuming no unanticipated catastrophe.”

Still, cuts to state and local government workforces has increased the contribution burden for these pension plans, making them slightly more expensive, the CRR report says. Additionally, there are still future funding issues to grapple with.

“In the longer term, there are still major pension asset deficiencies to be alleviated,” the MMA report says. “Smaller and weaker pension sponsors are always in undue peril, and the potential for politically-driven credit disruption in the name of pension funding will be high for the foreseeable future.”

This article was provided by Bloomberg News.