A study cam out analyzing the funding status of each state’s pension funds.  It is not pretty.  And these are funding levels using assumptions like 8% or 8.5% portfolio returns.  If the returns are lower, the funding shortfall will be worse.

NPR has a nice graphic of the data you can play with here.

And the Center on Budget and Policy Priorities has published a table of state budget shortfalls.

How Bad Will It Get? Total state budget shortfall in each fiscal year (2002-2012), in billions

This shows that the states are facing a shortfalls a little more than twice as bad as the previous recession.  I haven’t found numbers for earlier ones to give it a greater context.  But it seems clear that the main danger is if these shortfalls continue beyond 2012.  I predict this will result in higher volatility for municipal bond funds than we have seen historically.