Guaranteed Pensions Funds Will Begin Bankrupting Cities within 5 Years, Study

Guaranteed Pensions Funds Will Begin Bankrupting Cities within 5 Years, Study

Guaranteed Pensions Funds Will Begin Bankrupting Cities within 5 Years, Study

A new study by the Kellogg School of Management paints a grim picture for economies in cities across America.  The new study built on previous research done by the school that indicated there was more than $3 trillion in unfunded legacy benefits from state-sponsored pension plans.  The new research indicates that an additional $574 billion should be added to that total when city and county level pension plans are accounted for.

The newest research calculates the aggregate unfunded liabilities and forecasts the number of years funds will last for 77 defined pension plans in 50 major cities and counties in the U.S.  All of the pension plans included in the report are funded by taxpayer dollars.  The report looked at locations with more than $1 billion in pension assets at city and country levels, and covers more than 2 million local public employees and retirees.

The report accounted for two-thirds of total local government employees and estimated the remaining third of employees covered by non-state municipalities.  Many of the cities in the report have long-standing obligations due to pension plans and will likely face significant financial challenges. 

The study points out that the city of Chicago would need to use nearly eight full years of dedicated tax revenues to cover pension plans it has already agreed to. 

Six major cities are thought to be in danger of insolvency by 2020 because of pension promises they previously made.  The cities included Philadelphia, Boston, Chicago, Cincinnati, Jacksonville, and St. Paul.

There were an additional 18 cities and counties the report identifies as being solvent through 2020 but not through 2025.  New York City and Detroit were among the 18 locations.  The city in the direst situation is Philadelphia, which the study estimates will be insolvent by 2015 based on current assets and guaranteed pension plans.


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