Despite improving tax revenues and numerous reforms, state and local government finances remain in need of major fixes, a task force said Tuesday.

Public employee retirement benefits remain a major problem, according to the State Budget Crisis Task Force, with pensions underfunded by perhaps $1 trillion or so, depending on investment and accounting assumptions. But other experts said a banner 2013 in stock markets helped shrink that gap.  

Pension reforms enacted or under review by 43 states cover mainly new employees, the task force said, and “have had minimal effect on unfunded liabilities.”

After three years of research and analysis, the task force, which is chaired by former Lt. Governor of New York Richard Ravitch and Paul Volcker, former Chairman of the Federal Reserve, issued its final report with 10 recommendations for improving accountability and transparency state and local budgeting.

They come in the wake of bankruptcy filings by Detroit, Mich., Stockton, Calif., and other localities in 2013, and include proposals for mandatory “reserve” funds and multi-year financial planning by states and localities.

“Without deep-seated reform in state government fiscal affairs or federal recognition of the strains on state and local budgets, the future health of America’s communities and its economy are at great risk of further deterioration,” the task force said.

You can read its final report here and learn more about the task force here .

Volcker and Ravitch created the task force in 2011 in the wake of the financial crisis, which decimated state and local government finances,

They unveiled their recommendations at a press conference in Washington, D.C., to drive home one of report’s key recommendations: that the federal government formulate tax and spending decisions in coordination with state and local authorities.

“Particular harm could come to the most vulnerable populations as federal cuts are compounded by state and local reductions,” the report said. “And the damage is compounded by the fact that the federal government does not structure its own fiscal and programmatic actions to complement the objectives of state and local government. When resources are scarce, the penalties of acting without consultation and cooperation increase harshly.”

The task force said states lost more than $5 billion in funding in 2013 through “sequestration” budget cuts by Washington.

The task force also called for stronger regulation of the municipal bond market by the Securities and Exchange Commission to improve disclosure in sales of state and local government debt.

Peter Barnes joined FOX Business Network (FBN) in September 2007. He serves as FBN's senior Washington correspondent.