The Underfunding of State and Local Pension Plan
From: Economic and Budget Issue Brief, May 2011.
"The recent financial crisis and economic recession have left many states and localities with extraordinary budgetary difficulties for the next few years, but structural shortfalls in their pension plans pose a problem that is likely to endure for much longer. This issue brief discusses alternative approaches to assessing the size of those shortfalls and the implications of those approaches for funding decisions:

By any measure, nearly all state and local pension plans are underfunded, which means that the value of the plans’ assets is less than their accrued pension liabilities for current workers and retirees.

There are two leading approaches for valuing assets and liabilities, and the reported amount of underfunding varies significantly depending on which one is used.

Decisions about how to address the underfunding can be informed by the choice between those two
measurement approaches, but there is no necessary connection between the information provided by the two approaches and decisions about how much a plan’s sponsor should contribute each year.."