usThe shortfall between state pension liabilities and the assets plans have gathered and invested to pay for them has been variously estimated at anywhere from $500 billion to $3 trillion. The figure at the lower end is an aggregation of fiscal year 2008 funded status taken from the states’ own reports by the Pew Center on the States and published in Pew’s comprehensive white paper on state pension and health care plans, “The Trillion Dollar Gap.” The larger figure, by professors Joshua Rauh of Northwestern University and Robert Novy-Marx of the University of Rochester, is an estimate of underfunding as of June 2009, following the peak of the financial crisis; though pension funds’ assets were smaller at that time, the professors’ estimate sets much higher values on liabilities, borrowing methods from financial economics that differ from governmental accounting principles. Rauh and Novy-Marx grimly conclude that as of June 2009, state plans in the aggregate were funded at 41 to 56 percent, based on assets at market value and liabilities estimated using market discount rates.

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