States are facing a shortfall of $1 trillion to pay for pension and health care to retirees, according to the Pew Center. Orin S. Kramer, chairman of the New Jersey Investment Council, told Bloomberg the number is closer to $2 billion.

Whether it's $1 trillion or $2 trillion, the problem is gigantic. What this means is that states must raise the cash to cover any shortfall. According to the Pew Institute, states have saved $2.35 trillion and owe $3.35 trillion.

Here are the states which owe the most:

The odds that you'll have a long, healthy life are better than ever ... and that creates a pretty hefty problem for pension funds. They need to find new ways to meet their obligations in a turbulent market, and the risk that you'll hang on forever is approaching every day. So, unless we're able to pass legislation encouraging mass suicide among the Baby Boomers (it's a joke, people, read Christopher Buckley's Boomsday to see how it shakes out), pension fund managers have a hefty dose of risk to offload -- fast. They're looking at the insurance-linked securities market as a way to handle the problem.

All joking aside, pension funds and insurers are translating to total pension liabilities of $19 trillion in the U.S. and $3 trillion in the UK, according to a Reuters report using data from International Financial Services London. And, an increase in longevity by one year could translate into a 3% jump in liabilities. Put simply, the IFSL's data means another $600 billion in the U.S. and $90 billion in the UK. Basically, everything we do to stick around longer (not that I'm discouraging it) leads to a higher and higher price tag.

Its sights set on the United States and Asia, South Korea's $30 billion sovereign wealth fund is hunting for equities. Korea Investment Corp. (KIC) doesn't see bonds outperforming stocks over the long term, which is what has prompted the move.

Once the reallocation is executed, equities will account for half of KIC's "traditional" investments. Today, it stands at 40%. High quality equities and fixed income securities comprise 90% of KIC's portfolio, with the rest, one would gather, consisting of "non-traditional" investments.

The New York Times Co. (NYSE: NYT) reported a fourth quarter profit decline of 48% yesterday, but that actually managed to top analysts' expectations and the stock moved up 6.79%.

But there could be more trouble for the company. The Wall Street Journal reports (subscription required) that the market meltdown "blew out the Times's unfunded pension obligation to $625 million from $48 million at the end of 2007. The new figure is a whopping 73% of the Times' market capitalization."

Unless the market makes a miraculous rebound reminiscent of the Boston Red Sox (which the Times is in the process of trying to sell its stake in) 2004 ALCS comeback. the Times will have to fund that obligation over the next seven years.

University endowments and pension funds for government employees and teachers are big investors in venture capital partnerships. Now, thanks to the decline in the stock market, these endowments and pension funds have too big a proportion of their portfolios invested in illiquid venture capital and private equity funds. So they are trying to sell those interests -- and I am guessing they will fail to do so or take big losses when they do.

Two of the biggest funds are above their limits. Consider the largest university endowment -- Harvard Management Company -- which had $36.9 billion as of June 30. Harvard has reportedly hired a bank to sell its private equity investments that make up 13% of its portfolio for fiscal year 2009. The largest state pension fund, Calpers, has a 10% target for private equity -- which includes venture capital and LBOs -- and because of falling stock values, its private equity share exceeds the target by 3%.

The forced sale of these private company ownership stakes is not good for the venture capital industry, which saw investment fall 6.9% in the third quarter. There might be some demand for the illiquid shares of venture-backed startups from corporate venture capitalists. But with an initial public offering market in hibernation and VCs telling their portfolio companies to cut way down on their burn rates, it looks like this largely lost decade for IT innovation will end with a nuclear winter.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.