ALEC, and other economists and actuaries, claim that presumed rate of return is too optimistic, ultimately leading to the systemic under-reporting of liabilities, in turn lowering annual minimum contributions states make to pension plans.

“In effect, these state governments are relying on unlikely long-term investment gains to remedy decades of underfunding the pension funds,” ALEC’s report says. The non-profit advocacy’s membership is comprised of mostly conservative state lawmakers and corporations.

Instead of the average 7.34 discount rate, ALEC maintains a risk-free rate of 2.14 percent, drawn from an average of 10- and 20-year U.S. Treasury bond yields between April 2016 to March 2017, provides a more accurate measure of pensions’ funded ratios.

ALEC is not alone in advocating for a risk-free measurement of future liabilities. The Society of Actuaries recommends pensions use a risk-free rate to assume investment returns.

When applying the risk-free assumption on investment returns, the average funding ratio of the plans ALEC analyzed is a paltry 33.7 percent. All told the plans carry more than $6 trillion in unfunded liabilities, amounting to $18,676 of unfunded liabilities for every resident of the U.S.

Earlier this year, Pew Charitable Trusts released its study of state-sponsored pension plans, and it put the total unfunded pension liabilities at $1.1 trillion, based on the higher assumed rates of returns states use.

Using a risk-free assumption creates a seismic difference from reported funding ratios. For instance, California’s public pensions report an aggregate funding level of 70 percent. CalPERS, the nation’s largest public pension fund, uses a 7.5 percent assumed rate of return. However, in applying the risk-free rate of return, the funding ratio for California’s plans drops to 33 percent.

Wisconsin’s pension plan reports a 100-percent funding level, but under a risk-free rate assumption, it drops to 62 percent. The Badger State is the only state that can claim a funded-ratio above 50 percent using the risk-free model.

Here is a list of the 10 states with the lowest average funding ratios among the plans they sponsor when applying the risk-free model.

10. Pennsylvania

Funded ratio using risk-free model: 28.1 percent

Reported funding ratio: 58 percent

Assumed rate of return in 2015, according to Pew Survey: 7.5 percent

9. South Carolina

Funded ratio using risk-free model: 28 percent

Reported funding ratio: 60 percent

Assumed rate of return in 2015, according to Pew Survey: 7.5 percent

8. Massachusetts

Funded ratio using risk-free model: 27.2 percent

Reported funding ratio: 59 percent

Assumed rate of return in 2015, according to Pew Survey: 8 percent

7. Hawaii

Funded ratio using risk-free model: 27.2 percent

Reported funding ratio: 55 percent

Assumed rate of return in 2015, according to Pew Survey: 7.8 percent

6. Michigan

Funded ratio using risk-free model: 26.9 percent

Reported funding ratio: 62 percent

Assumed rate of return in 2015, according to Pew Survey: 8 percent

5. New Jersey

Funded ratio using risk-free model: 25.7 percent

Reported funding ratio: 57 percent

Assumed rate of return in 2015, according to Pew Survey: 5.2 percent

4. Mississippi

Funded ratio using risk-free model: 24.2 percent

Reported funding ratio: 54 percent

Assumed rate of return in 2015, according to Pew Survey: 8 percent

3. Illinois

Funded ratio using risk-free model: 23.3 percent

Reported funding ratio: 47 percent

Assumed rate of return in 2015, according to Pew Survey: 7.3 percent

2. Kentucky

Funded ratio using risk-free model: 20.9 percent

Reported funding ratio: 44 percent

Assumed rate of return in 2015, according to Pew Survey: 6 percent

1. Connecticut

Funded ratio using risk-free model: 19.7 percent

Reported funding ratio: 47 percent

Assumed rate of return in 2015, according to Pew Survey: 8.2 percent