U.S. state and local government pension funds control more than $4 trillion in public-worker retirement savings but will need hundreds of billions of additional dollars to cover promised future benefits. Over the past 12 years, blockbuster stock performance has swelled pension coffers, bringing state and local governments closer to being able to cover those liabilities and taking some of the pressure off taxpayers already burdened by high pension costs.
A downturn, however, could ultimately squeeze state and local budgets. That is because when pension-fund returns fall short, the workers and government employers that pay into them end up helping to make up the shortfall. Annual pension contributions are already a drag on the finances of some cities and states, leaving less money for operations and debt payments and leading to credit-rating downgrades.U.S. Retirement Funds, Heavy on Stocks, Brace for Losses – WSJ