US state pension funds are facing a shortfall of several hundred billion dollars and are in much worse shape than corporate pension funds, according to the head of one of the biggest state pension funds in the US.

Orin Kramer, chairman of the $70bn New Jersey pension fund, warned that the underfunding in the state funds which provide pensions for teachers, fire and police officers and other public employees would grow if no action were taken, jeopardising the entire pension system. He estimated that the shortfall for the New Jersey fund alone was more than $30bn.