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U.S. state and local government public pensions are taking big hits as financial markets globally melt down, and it's not as if they were doing all that well to begin with.

A MarketWatch report says that that could play into a hit for those local governments, which are on the hook for future benefit payments to firefighters, police and civil service employees.

Tom Aaron, vice president at Moody's, is quoted in an analyst report from Moody's Investors Service saying, "Recent U.S. public pension investment losses, which we estimate are approaching $1 trillion, stand to severely compound the pension liability challenge already facing many governments."

And that in turn could affect the creditworthiness of municipalities, with municipal bond analysts already warning that that could be the threat presented by a drop in public pension funding levels after a recession.

Moody's has estimated that as of March 20, public pension plans looked to be in line for an average investment loss of about 21 percent in the fiscal year ending on June 20.

California Public Employees' Retirement System (CalPERS), all by itself, accounts for some $69 billion in losses, according to a report in the Sacramento Bee, thanks to the coronavirus's effect on markets. Just a month ago, CalPERS officials put the fund's balance at a record high of $404 billion; now it has shrunk to about $335 billion.

And while the drop in Treasury yields has resulted in an increase in value of pensions' fixed-income portfolios, at the same time it has caused the overall liabilities of public pensions to soar by lowering the average return they can expect from bonds.

That could cause pension fund managers to turn to more volatile and risky strategies and assets as they try to make up lost ground.

Moody's did say that the trend could reverse, but if that fails to happen, state and local governments will be in the crosshairs as they try to come up with the difference.

"Without a dramatic bounceback of investment markets, 2020 pension investment losses will mark a significant turning point where the downside exposure of some state and local governments' credit quality to pension risk comes to fruition because of already heightened liabilities and lower capacity to defer costs," Aaron is quoted saying in the report.

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