This excerpt originally appeared in Public Sector Inc. on January 26, 2012.

We considered the drivers of the underfunding problem: the misvaluation of pension liabilities which has led to more investment risk exposure on the asset side. As Steven Malanga has pointed out the problem in underfunded public pensions is revealing itself more quickly and more dramatically on the local level. Central Falls, Rhode Island's bankruptcy was followed with Woonsocket turning off the street lights.