CHARLESTON, W.Va. -- West Virginia's Teachers Retirement System is the most underfunded teacher pension plan in the nation, according to a report released Tuesday by the Manhattan Institute for Policy Research.

The report, which analyzed 59 state and local teacher pension plans, concludes that the West Virginia pension system is only about 31 percent funded.

That's well below the estimate provided by the Consolidated Public Retirement Board, which in its most recent analysis concluded that TRS was 50 percent funded -- with assets and unfunded liabilities each at $4.1 billion.

By contrast, the report determined that only three teacher pension plans in the country are better than 75 percent funded: plans serving the District of Columbia, New York state and Washington state.

In its report, "Unfunded Teacher Pensions: It's Worse Than You Think," the institute concludes that all states and localities -- including West Virginia -- are underestimating their unfunded liabilities.

The 59 pension funds studied report unfunded liabilities totaling $322 billion. However, report authors Josh Barro and Stuart Buck conclude that the actual deficit is $933 billion -- with $484 billion of the difference attributed to overly optimistic expectations for returns on long-term investments.

The teacher pension funds assume an average growth in investments of 8 percent a year -- an assumption the authors contend is not only unrealistic, but is likely to lead to financial crisis in the future.

"This assumption permits public officials to contribute fewer dollars toward satisfying pension obligations, and thus to avoid taking the cautious but unpopular step of raising taxes or cutting services," the report states.

Most private-sector pension plans use a more conservative, and more achievable, 6 percent growth rate assumption for stocks, bonds and other investments, the report notes.

The difference between the 6 percent and 8 percent assumptions works out to the $484 billion unfunded liability that the study concludes is not being reported by teacher pension plans.

(West Virginia's retirement plans, including TRS, assume a 7.5 percent annual growth in investments.)

The report from the fiscally conservative policy institute recommends that states and localities consider transferring teachers from defined-benefits plans to 401(k)-style defined-contribution plans.

However, the report notes that such transfers may run into opposition from affected parties.

"Public employees unions' opposition to defined-contribution retirement plans is often fierce, making a shift infeasible in some states," the authors note.

In 2008, the West Virginia Legislature passed a bill that ultimately resulted in nearly 15,000 teachers and school personnel transferring out of the state's Teachers Defined Contribution system and into the TRS, a defined-benefits plan.

"No matter what path pension reform may take, state governments have no excuse not to admit the extent of their unfunded liabilities," the report states. "They must take serious and substantive steps to prevent financial disaster in the future."

Anne Lambright, director of the state CPRB, was unavailable for comment Tuesday.

Reach Phil Kabler at ph...@wvgazette.com or 304-348-1220.