In its report — “U.S. State and Local Government Pensions Lose Ground Despite Meeting Return Targets” — Moody’s says the 25 largest public pensions face roughly $2 trillion in unfunded liabilities.

On average, those funds returned 7.45 percent from 2004 to 2013, nearly reaching the expected rate of return of 7.65 percent. But Moody’s also claimed that liabilities tripled in the same time.

The growth in liabilities has been due to “inadequate pension contributions, stemming from a variety of actuarial and funding practices, as well as the sheer growth of pension liabilities as benefit accruals accelerate with the passage of time, salary increases and additional years of service,” it said in its report.

In the letter sent to Moody’s, NASRA claims Moody’s misrepresented the facts in coming to its conclusions.

Low interest rates have limited investment returns, a fact NASRA feels the report was wrong to omit.

Nor does the report clarify that its conclusions do not represent funding mandates, potentially confusing investors, according to the letter.

NASRA also claims that Moody’s failed to measure inflation in its estimates of liabilities. Had it done so, NASRA claims Moody’s would have found that liabilities have actually been reduced by 20 percent from 10 years ago.

It also took issue with how Moody’s benchmarks returns in periods where the report claims the funds lagged, claiming the ratings agency misleadingly measures the funds against S&P index returns.

“Public plans, like other diversified investors, do not use a single asset class, such as the S&P, as a benchmark for the entire portfolio,” the letter said.

Elsewhere, Moody’s was critical of pension funds use of alternative investments, accusing them of assuming too much risk in doing so.

NASRA took issue with that, too. “The report does not include the fact that these allocations are also part of an effort to diversify and lower risk,” it said.

NASRA claims that in its criticism of alternative assets, Moody’s fails to differentiate private equity from hedge funds and other alternatives.

“Private equity, the primary type of alternative investment, has been the highest performing asset class for most public pension funds the last decade,” said NASRA.

The Moody’s report even fails to give an accurate accounting of total state and local pension assets, according to the letter.

Moody’s published those assets as being $5.29 trillion. According to NASRA, the Federal Reserve calculated total fund assets to by $3.7 trillion as of June 2013.

“The report perpetuates the very type of confusion that stakeholders urged Moody’s to avoid,” said the letter.

NASRA said it hopes that future Moody’s reports will demonstrate “a better command of the relevant facts.”