New research from Robert Novy-Marx and Joshua Rauh [PDF] projects a nearly 50% higher level of unfunded pension liabilities than most cities acknowledge.

Most cities use Entry Age Normal accounting, which assumes employees will retire at a normal age and not receive any increase in benefits.

A more accurate system is Present Value of Benefits accounting, which assumes employees will retire at a normal age after receiving typical salary and benefit increases.

Suddenly the pension crisis looks even more dire.