For over a decade, states* have been enacting laws to address the endemic and growing problem of unfunded pension liabilities. The Pew Center on States estimated in February 2010 that the unfunded liability for pensions and retiree health care costs combined represented a "Trillion Dollar Gap." However, it is generally recognized by financial and actuarial experts that the Pew Center's numbers were actually quite understated due to the use of an 8% discount rate and "smoothing" out investment gains and losses over a number of years. In 2009, for instance, Professors Robert Novy-Marx of Univ. of Chicago and Joshua Rauh of Northwestern University calculated this gap to actually be in the realm of $3.23 trillion.
