Public officials say that one of the nation's most influential credit rating agencies is to blame for creating the perception that there are widespread public pension shortfalls. In a letter late last week, the National Association of State Retirement Administrators accused Moody's of "mischaracterization and misuse" of "manipulated pension numbers" when the agency declared that public pension shortfalls tripled to roughly $2 trillion between 2004 and 2012. 

Moody's data is particularly influential -- it can potentially affect state and local governments' credit ratings, which in turn can move the interest rate at which those governments can borrow money. The credit rating agency's declarations can shape budget decisions in states that are debating the long-term affordability of their public pension systems.

The firm's recent projection about pension shortfalls came a little more than a year after the agency changed the way it calculates pension assets and liabilities. That change, which has been criticized by some economists, involved using a lower projected interest rate to evaluate liabilities, and reducing the projected long-term growth of current assets in pension portfolios. 

In the announcement of its methodology change in 2013, Moody's declared "that for the majority of U.S. governments, their pension obligations remain manageable in the context of their revenues and resources." Yet the new projections generated a spate of recent headlines suggesting the pension shortfalls were an emergency.

In its letter slamming the new projections, NSARA says that Moody's revised methodology "results in a picture of the state of public pensions that is unrealistic, misleading and confusing."

In a 2011 report, Dean Baker of the Center for Economic and Policy Research argued that while projected multi-trillion-dollar shortfalls may seem like a crisis requiring major pension benefit cuts, those shortfalls should be considered in the context of overall public budgets over the time that the pension benefits are scheduled to be paid out.

"The size of the projected state and local government shortfalls measured as a share of future gross state products appear manageable," Baker wrote. "The total shortfall for the pension funds is less than 0.2 percent of projected gross state product over the next 30 years for most states. Even in the cases of the states with the largest shortfalls, the gap is less than 0.5 percent of projected state product."

Earlier this year, the taxpayer watchdog group Good Jobs First published a study showing that in many states and cities, the size of annual pension shortfalls is dwarfed by the amount spent on subsidies to corporations. Unions say that means there's plenty of money to meet pension obligations, but that lawmakers are choosing to spend the money elsewhere.