The market crash and the economic fallout from the coronavirus have led to nearly $1 trillion in investment losses for U.S. public pension funds, Moody's Investors Service said.

The credit rating agency said the funds are generally facing an average investment loss of about 21% in the fiscal year that ends June 30, based on a March 20 snapshot of market indexes.

The severity of the spreading COVID-19, the disease caused by the virus, and government-ordered shutdowns in various U.S. states have weighed heavily on Wall Street, with the Dow Jones Industrial Average erasing over three years of gains in one month.

“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,” Tom Aaron, a Moody's vice president, said in a statement.

Recent volatility in equity markets leaves open the potential for improvements or further degradation of pension investment performance, according to the rating agency, which noted that pension system assets are heavily allocated to equities and alternatives to fixed-income securities.

If investment losses are not reversed, governments could face a nearly 60% increase in pension contributions in fiscal 2021 to prevent unfunded liabilities from growing, according to Moody's.

Credit impact from the investment losses will depend on many factors, including the ultimate magnitude of asset declines, the unique funding and cash flow position of governments' pension systems, and the ability to absorb cost hikes in their budgets while continuing to provide services and pay debt service, Moody's said.