The plans he surveyed expect an average annual return of 7.6 percent. In order to generate those returns, pensions have taken “increased investment positions in the stock market and other risky asset classes such as private equity, hedge funds, and real estate,” he said.

Pension trustees base the ability to cover future liabilities on the assumption returns will be “achieved with certainty.”

Under GASB 67, which was first implemented in June of 2013, public funds that predict an exhaustion of assets must use a lower discount rate pegged to high-quality municipal bonds when assuming future shortfalls, and not higher assumed rates of return.

In fiscal year 2014, only 11 percent, or 63 of the plans used the lower discount rate. And when they did, they applied a rate that was only 1.1 percent below the higher assumed returns.

Rauh says the appropriate discount rate is a U.S. Treasury bond with a ten-year maturity. At 2.66 percent, the aggregate unfunded liability jumps to more than $3.4 trillion, substantially more than the $1.9 trillion the funds are reporting.

“This study shows that unfunded pension liabilities are devastatingly widespread and only getting worse,” said Rauh, in a statement accompanying the study’s releases.

“With hundreds of state and local governments drowning in retiree benefit debt, the need for bold structural reform has never been so pertinent. We need to bring local and state governments’ retiree benefits back to solvency before we see this vast epidemic limit the ability of state and local governments to provide adequate services in areas such as public safety and education,” he added.

Recently, Andrew Biggs, an economist with the American Enterprise Institute, a Washington, D.C.-based conservative think tank, was critical of data from the National Association of State Retirement Administrators, which said annual taxpayer contributions to pensions don’t comprise a “significant portion of state and local pensions.”

Biggs also noted what he says are the inflated discount rates applied to public pensions.

If public pensions were required to apply a discount rate similar to private sector pensions, governments would be contributing 20 percent of total taxpayer revenues to fund pensions annually. NASRA says in 2013, government contributions to pensions represented 4.1 percent of spending.

Biggs also points out that public pensions are also allowed to amortize debt over a 30-year period, compared to private sector pensions, which must do so over seven years.

“When a government low-balls its contributions by assuming high rates of return on risky investments and then amortizes investment losses over 30 years, it’s doing nothing other than making future taxpayers fund the pension benefits that current taxpayers should have paid for,” writes Biggs.

“The reason [state and local] pension contributions are seemingly low is quite simply [because] these governments aren’t fully funding their pensions,” added Biggs.