Bloomberg Markets recently released a bombshell of a story on Minnesota's public-pension system. "New Math Deals Minnesota's Pensions the Biggest Hit in the U.S." It reported that "Minnesota's debt to its workers' retirement system has soared by $33.4 billion, or $6,000 for every resident, courtesy of accounting rules. The jump caused the finances of Minnesota's pensions to erode more than any other state's last year … ."

Bloomberg has called attention to the fact that the financial stability of Minnesota pensions, relative to other states, has plummeted, and that even judged against its own standards, the system is in big trouble. The system admits to an $18 billion unfunded liability for state, local and school district employees. But the Bloomberg report puts our total unfunded liability at $108.9 billion. That's more than $20,000 for every resident.

A new Bloomberg study applied something called GASB reporting (Governmental Accounting Standards Board) to public-pension funds. Minnesota fell from having a system that was about 80 percent funded, and 30th in the nation, to having the seventh-worst-funded in the country, with only 53 cents on the dollar to pay pension promises. The study, by the way, lumps state and municipal funds together. In reality, each has its own funding ratio, but Bloomberg did that to give us the big picture.

When applying the same standards to public funds across the country, it makes sense that Minnesota fell to nearly the bottom. This is because the state has failed to move as fast as others in lowering expectations about what it can earn on pension investments and in updating how it calculates its liabilities.

Does this mean retirees are only going to get 53 cents on the dollar? Not yet, but only because pensions are guaranteed under the law. But to keep those pension promises, the funds are running massive deficits. They make up the shortfall by taking big risks in the market, taking more from taxpayers and using current employee contributions to shore up the funds. It's a Ponzi scheme. At some point, the game will be up.

Private-sector pensions have always been required under federal law to follow strict and very conservative accounting standards known as FASB. Public-sector pension funds, however, are not held to those same standards. GASB is only a reporting standard; it does not set actual funding policy.

In fact, public-pension funds, which are controlled by government unions and politicians, are in charge of how pensions are funded and reported. When funds hit a rough patch, unions look for a solution they can sell to members, and legislators look for a solution that won't hurt them at the polls.

GASB reporting standards were updated after the 2008 financial crisis. The idea was that if responsible officials had an accurate accounting, they would do a better job of managing the funds. GASB is like standing in front of the mirror — naked.

Why haven't our elected officials been talking about this? Because pension debt is completely "off the books." Out of sight, out of mind.

Pensions are also one of the reasons why state and municipal governments keep taking more from public employees and taxpayers but never seem to have enough.

Here is what Warren Buffett said in 2014: "Local and state financial problems are accelerating, in large part because public entities promised pensions they couldn't afford. Citizens and public officials typically underappreciated the gigantic financial tapeworm that was born when promises were made that conflicted with a willingness to fund them."

As of 2014, Minnesota was the last state in the nation to assume that it could earn 8.5 percent when investing pension funds. The next year, all but one plan dropped to a still very high 8.0 percent return rate, and those plans remain there today. The Teachers Retirement Association ("TRA") is still stuck at 8.5 percent. Just to compare, New York dropped to 7.0 percent — and given long-term forecasts, that assumption, too, is still considered several points too high.

This one assumption has a huge ripple effect on retirement funds (e.g., how liabilities are calculated, how much is contributed by both employees and employers). Minnesota has suffered from a triple-whammy: It set the contribution rates too low and, since about 2001, failed to make full payments. At the same time, it increased benefits to retirees. That is why we are in a deep hole.

Once pension funds get behind, it gets harder to recover. This is partly because the pension funds pay out set benefits to retirees while saving and investing for current employees. Unlike in Wisconsin, the benefit paid out to retirees in most states, including Minnesota, does not depend on the fiscal health of the fund. So even if public employers failed to put enough aside to cover the pensions promised to employees, the benefit must be paid.

While Gov. Mark Dayton sponsored a "blue-ribbon panel" to study pensions, none of the recommendations made it into law. In fact, the 2016 and 2017 pension bills offering small steps in the right direction were vetoed by Dayton.

Bloomberg is right to sound the alarm in Minnesota, because the pension system is designed to fight change. But we must figure this out, because hundreds of thousands of Minnesotans are counting on the state to make good on their retirement, and we are all counting on government to keep its promise of delivering services for our tax dollars.

Kim Crockett is vice president and senior policy fellow at the Center of the American Experiment, and is the author of "Keeping Promise: Securing Retirement Benefits for Current and Future Public Employees."