This excerpt originally appeared in Warwick Beacon on May 31, 2012.

In the opinion of Eileen Norcross, a senior researcher with the Mercatus Center at George Mason University, a 7.5 percent rate of return on investments is unrealistic and the city should adopt a 2.4 percent “risk-free” return based on U.S. Treasury Bond yields.

Norcross and Benjamin VanMetre, also of the Mercatus Center, completed a 15-page “working paper” on the state’s local pension debts last November, concluding that the unfunded liability of locally administered plans would leap from $2.4 billion to $6 billion if the “risk-free” model were used.

“The result of this miscalculation is that many municipal governments are in far worse shape than is currently reported, which presents serious challenges for a number of Rhode Island municipalities,” reads the paper’s summary.