Abstract
A large majority of state and local government pension plans in the United States are seriously underfunded (General Accounting Office (GAO) [1979] and Advisory Commission on Intergovernmental Relations (ACIR) [1980]).1 However, detailed estimates of unfunded pension liabilities for most governmental units are generally available only in a few states where local governments are required to report them (e.g., Pennsylvania).2 Both Ehrenberg and Smith [1981] and Epple and Schipper [1981] examined the unfunded pension liability information provided by local governments in Pennsylvania. The former reported that public employees perceive unfunded pension promises as quite risky and demand some degree of compensation in the form of higher wages for the risk associated with underfunding. The latter provided some evidence that unfunded obligations are capitalized into local land and housing values. The Bureau of Census' Census of Governments reports various pension
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