(Bloomberg News) U.S. public pension-fund assets fell in the third quarter by the most since 2008 as stocks sank amid concern that Europe's debt crisis would curb economic growth, Census Bureau data showed.

Assets of the 100 largest public-worker plans decreased $237 billion, or 8.5 percent, from the prior quarter to $2.53 trillion by Sept. 30, the bureau said today in a report. It marks the first decline since the second quarter of 2010 and the biggest since the last three months of 2008, when holdings slid 13 percent during Wall Street's credit crisis.

The setback may strain state and local governments that have set aside more money to cover retirement benefits. That's pressured governments already coping with diminished tax collections and has propelled efforts to reduce benefit costs.

The asset decline was driven by losses in stock holdings, which slipped $134.7 billion to $769.6 billion, the Census Bureau said. The value of holdings of corporate bonds, U.S. treasuries, and international securities also fell.

The third-quarter rout pushed the pensions' assets back to where they were during the last three months of 2010, wiping out gains this year.

Markets Swinging

Pension funds typically count on earnings of about 8 percent a year to pay for promised benefits, which means they need more money to pour into their funds or to generate returns that will compensate for years when money is lost.

Fund overseers use accounting techniques to spread gains and losses over time. That prevents required contributions from swinging with changes in financial markets, though losses elevate required contributions over time.

U.S. stock markets have recovered some of the losses suffered during the third quarter as European authorities moved to ease strains on banks and countries in the euro currency zone. The Standard & Poor's 500 Index has gained 11 percent since the end of September, recovering most of the 14 percent loss from the prior three months.