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Defined benefit plans (where the risk of payment is borne by the employer) are things of the past.
With exploding plan costs (thank you Alan Greenspan and Ben Bernanke) and sharply lower investment returns (thank you Alan Greenspan and Ben Bernanke), more employers, be it private sector or public sector, are providing defined contribution pensions (where the risk is borne by the beneficiary).
State and municipal governments are feeling pain, with tax revenues down. States are feeling the squeeze because income taxes are down (pervasive unemployment). Municipalities are in pain because assessed home values, and therefore property taxes are down (housing bubble popping, foreclosures, pervasive unemployment).
Revenues are down, and at the same time the cost to pay into pensions and post-retirement healthcare plans is spiking. Unfortunately, since the states can't print money to pay their bills like the U.S. gov't can, states have to cut expenses.
You will likely see, especially this year, an acceleration in state and local layoffs and even benefit curtailments.
Unfortunately, that's just how the math is working out.
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