Megan McArdle points to this analysis of why public worker pensions are underfunded. Basically, seemingly innocuous assumptions about the rate of return are very unrealistic, and this leads to massive underfunding.
Back in 2003, when many Republicans were pushing private social security accounts, I called them out on what I called the "stock market scenario," which uses an unrealistically high return to make privatization seem like a free lunch. State and local pensions are underfunded because of similarly unrealistic assumptions.
The reason I title this post "paging the left" is that I think it is time for someone other than a right-leaning economist to call the states and cities out on this. Brad DeLong? Mark Thoma? Dean Baker?