FORGET THE RECESSION-TALK. WANT REALLY BAD ECONOMIC NEWS? Try this report:

By firing its actuarial consultant last week, the New York State Legislature shone a light on one of the public sector’s deepest secrets: All across the country, states and local governments are promising benefits to public workers on the basis of numbers that make little economic sense. . . . In the private sector, pension funds are highly regulated, and actuarial numbers are less of an issue. But in government, actuaries and the consulting firms that employ them are starting to draw lawsuits in places like Alaska, San Diego, Milwaukee County, Wis., and Evanston, Ill. . . .

Two big problems are being laid on actuarial doorsteps: overly aggressive investing and overly rich benefits. Benefits can go off the scale because widely used actuarial methods tend to make them look inexpensive. And this tends to encourage aggressive investing, because the greater the risk in the portfolio, the less costly it can seem to provide the benefits.

Read the whole thing. This has the potential to be much, much worse than Enron, and with much, much less accountability — because, you know, it’s government instead of those greedy selfish businessmen.