Also nicked: the University of Miami, cited for lower liquidity and an increasingly underfunded pension plan for employees.

FORBES: More Colleges See Bonds Downgraded

Overall, what the transition is really financing is the increased savings and investment involved in shifting from a pay-as-you-go system to a fully funded system, just as with eliminating the unfunded liabilities of any underfunded pension plan.

FORBES: A Personal Account Option For Social Security

Parents sued Alabama's prepaid tuition plan board in 2010 after learning the plan was underfunded, and they could receive smaller payouts under a settlement.

WSJ: Parents Fear the Math Doesn't Add Up for Prepaid College Plans

"Illinois failed to disclose that its statutory plan significantly underfunded the state's pension obligations and increased the risk to its overall financial condition, " the SEC said in a statement.

BBC: SEC logo

Other things being equal, a company with an overfunded pension plan is more valuable than one with an underfunded one.

FORBES: 2004 Mutual Fund Survey