States are short $1.26 trillion in paying for public employee pensions and other retirement benefits, a gap that grew 26 percent in one year and will take many more years to wipe out, Reuters reported.

A report released today by the Pew Center on the States said that a total of 31 states had pensions that were underfunded, (defined as being less than 80 percent funded) in fiscal year 2009, the latest year for which data is available, which was up from 22 states the previous year.

Iowa was 81 percent funded.

States were short $660 billion for future pension payments and $604 billion for other retiree benefits, such as health care.

Preliminary data for fiscal year 2010 shows that pension funding levels of 10 states deteriorated further, and just three registered increases.

“Overall, these results suggest that while states benefited from better returns in fiscal year 2010, the legacy of the financial crisis … will remain an issue for years to come,” the Pew Center said in the report.

States typically assume an 8 percent annual return, and their pension plans suffered a median 19.1 percent drop in their assets’ market value in fiscal 2009, the report said.