Second in the "They're Burning Your Money" series this week on Fox Business

For the second year in a row, senior citizens will not receive a cost-of-living adjustment in their Social Securitychecks for 2011, because the government says there was no growth in a key inflation index used to measure benefits.

That is the second year without an increase since the government launched automatic adjustments pegged to inflation in 1975. The first time being 2010.

You don't see such reductions yet on a nationwide scale when it comes to government worker pensions. Not only do government workers pull down salaries larger than the comparable private sector worker, but the pension and benefits they get also typically outstrips the private sector.

As New Jersey governor Chris Christiehas noted, "A retired teacher paid $62,000 towards her pension and nothing, yes nothing, for full family medical, dental and vision coverage over her entire career. What will we pay her? $1.4 million in pension benefits and another $215,000 in health care benefit premiums over her lifetime." Christie also says that state worker benefits are on average about 40% higher than what the Fortune 500 worker gets.

Much of Fox Business's focus this week is on spending on the federal level. But cities, counties, parishes and states are struggling with the same issues - and have to raise taxes or make cuts. Which is why Fox business takes you to Rye, N.Y., where local officials are mulling hiking property taxes to help pay for government pensions.

A study done by Northwestern University and the University of Rochester study says public pensions on the city and county level are underfunded by $574 billion.

But the researchers found that state-run pensions are underfunded by $3 trillion. The Pew Center on the States has similar findings.

It says there's a $1 trillion gap between how much states have set aside ($2.35 trillion) and how much they need ($3.35 trillion) to cover retirement benefit costs.

Pew estimates that shortfall will have to be paid over the next 30 years by states and local governments, costing each American household $8,800.

And the $1 trillion gap may even be wider because the numbers Pew based its study on are from early 2008, before the stock market plummeted (states' fiscal years end in June).

This year alone, 16 states have slashed benefits for government employees or forced them to personally increase their own contributions to their retirement accounts, according to the National Conference of State Legislatures.

States like Colorado, Minnesota and Wyoming, have moved to cut the benefits of current workers, rather than limiting changes to future ones.

Missouri has made dramatic cuts across the board, as has New Jersey, where the state treasurer has refused to rule out the possibility that even current retirees will see their pension checks slashed or their health premiums go up as the state struggles with an enormous pension shortfall.

The differences between public and private benefits is pretty stark. Only 1 in 7 private sector workers has a pension. This compares with 90% of public workers.

Ten years ago, more than half of the states had fully funded pensions. By 2008 - the latest data available - just four states could make that claim: Florida, New York, Washington, Wisconsin.

Eight states -- Connecticut, Illinois, Kansas, Kentucky, Massachusetts, Oklahoma, Rhode Island and West Virginia - have one-third of their pension liability unfunded.

And 19 states are said to have "serious concerns" funding their pensions, including California, Illinois, Arkansas, Colorado, Maryland and Nevada.

Five of these 19 states have pension-funding levels of less than 62%: Illinois (54%), Kansas (59%), Oklahoma (61%), Rhode Island (61%) and Connecticut (61%).

In Rye, New York, Mayor Doug French says he may have to raise property taxes by 2% next year to help contribute more money to the fund. Rye's pension fund went from $1.3 million last year to $1.7 million this year. Rye residents are footing the bill.

Outrage over government pensions came to the forefront this year when the news broke that officials with the City of Bell, a tiny, low-income community outside Los Angeles (per capita income was $24,000), were earning huge salaries and benefits. Four City Councilmembers earned $100,000 a year even though their positions are largely part-time. The City Administrator, who oversees services for the town of 38,000 earned almost $800,000 per year, double what the President of the United States earns. Charges have been filed, officials have resigned, and council members voluntarily docked their pay.

Government pension reform is now on the table in a big way in states like Missouri, which passed pension reform legislation earlier this year. Under the legislation, new government employees must contribute to their pension plans for the first time, starting in January.

Plus they now have to work twice as long until they become vested and can access those savings. Also, the retirement age will rise from 62 to 67 - the highest in the nation, along with Illinois. The plan is expected to save the state $660 million over the next decade.

Such government worker compensation reform is why unions have been active pushing for various state tax and spending increases on the ballots in 33 states.

Leaders of the AFL-CIO and the Service Employees International Union have agreed to coordinate spending millions of dollars in the midterm elections to support pro-union candidates, most of them Democrats, reports indicate.

The two labor organizations say they have a combined $88 million or more to deploy in this year's election cycle.

The SEIU, with 1.8 million members, reportedly has budgeted $44 million, up 26% from 2006. Most of the SEIU's $44 million comes from the 300,000 of its members who donate $7 monthly to the union political-action committee. In the last midterm elections, union households represented 23% of the electorate, according to exit poll data.