As the bull market enters its 11th year, state and local pension plans are piling on risk, as they try to make up shortfalls. Public plans had a median 47.3% of their assets in U.S. equities at the end of the third quarter, according to database Wilshire Trust Universe Comparison Service.

That is more than they have had since 2007 and up from 44.1% a year earlier. Taking on more exposure to stocks is a riskier bet, especially as global economic growth is slowing and talk of a potential recession has grown louder.

Those risks can translate to consequences in a decline: Big hits to pension funds’ stock portfolios during the financial crisis were followed by a wave of benefit cuts for government workers hired since then. Retirement systems that manage money for firefighters, police officers, teachers and other public workers are banking on market returns of 7% or more to help cover shortfalls. State and local pension plans have about $4.4 trillion in assets, according to the Federal Reserve, $4.2 trillion less than the value of promised future benefits.

“They are looking for risk and finding it in the equity market, and historically they have been benefiting from that,” said Robert J. Waid, managing director at Wilshire Associates. “The concern is going to be when and if that changes.”

Many plans have also added new kinds of risk since the crisis. Alternative investments such as private equity made up a median 5.6% of public plan portfolios at the end of the third quarter, the most since Wilshire TUCS began collecting the data. Some plans have also shifted money out of more conservative investments such as bonds. Total equity allocations, including international stocks, have risen as high as 59.4% in the past decade, according to the data, and stood at 57.4% of assets as of the end of the third quarter.

Pension-fund returns can have profound impacts on a city or state because when returns fall short, the amount the government must contribute increases, potentially diverting money from other public services.

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