TRENTON -- New Jersey's distressed government worker pension system is now the worst funded in the U.S., according to a report by Bloomberg.

The Garden State's public pension fund has languished near the bottom, but has now dropped below Kentucky and Illinois for last place, according to the report.

Their analysis compared the states' funding ratios, or their assets in relation to their pension debt.

As of July 1, 2015, New Jersey's state and local pension funds have just 37.5 percent of the funding it needs to pay for future benefits. That is based on new reporting standards that require the state to project lower investment returns and had bleak consequences for the state's estimates.

New Jersey's state and local pension funds had slightly more than $217 billion in liabilities and $81.4 billion in assets, leaving it with $135.7 billion in unfunded liabilities, up from $113.1 billion as of July 1, 2014.

Kentucky's funding ratio is 37.8 percent and Illinois' 40.2 percent, according to Bloomberg, which also reported the median state funding ratio is 74.5 percent.

New Jersey, Bloomberg said, is "among states whose retirement systems slipped further behind as rock-bottom bond yields and lackluster stock-market gains caused investment returns to fall short of targets.

The state's pension system assumes long-term investment returns of 7.9 percent, but it has fallen short the past two fiscal years. The fund lost 0.87 percent in the fiscal year that ended in June, based on unaudited figures, and investment returns in the year before were 4.16 percent.

The public worker pension funds' returns last year were among the worst of large public pension funds -- those with at least $10 billion in assets, according to Treasury Department data. The funding estimates, however, do not account for these more recent results.

Years of underfunding have also weakened the pension system. The state contributes much less than is recommended by actuaries to keep up with the piling obligations.

A state law designed to force the state to gradually ramp up to that full actuarial payment was invalidated by the state Supreme Court. Gov. Chris Christie has gradually increased payments, and the state will contribute $1.86 billion this year -- 40 percent of what's recommended by actuaries.

Public worker unions are seeking a constitutional amendment next year requiring the state make increasing contributions into the pension system.

Some funds within the system that receive contributions from local governments, including the fund for police and firefighters, are better off than those that rely on state contributions.

A Treasury Department spokesman, Joe Perone, said Wednesday that "Regardless of the state's rank, New Jersey will need further public worker benefits reforms ... so it can improve upon its liabilities. If additional health care and pension cost reforms were enacted, the liability would drop considerably and our public benefit costs would be affordable and sustainable."

Samantha Marcus may be reached at smarcus@njadvancemedia.com. Follow her on Twitter @samanthamarcus. Find NJ.com Politics on Facebook.