There are three major threats threatening both state and local governments across the country. Bond defaults, health care costs and pension liabilities. Any one of them can bring down a state or local government on its own, yet we have many that face multiple threats. Now, a state may not be able to go bankrupt under current law, but they can go into receivership which will trigger a wave of problems not unlike a bankruptcy.
It already happened in Prichard, AL, as they couldn’t meet their financial obligations any longer and just quit mailing pension checks. They canot legally do this so we know where this is going. Prichard is just a small taste of what is to come. Many of our nations major cities and then of course the states also face the same fate. Business Insider magazine put together a list of those who are on the hot seat and most likely to go down next. I would think they are being optimistic in their projections. As the unemployment rate stays in the stratosphere and our federal government continues its policies which are detrimental to all of us, the economic pressures are likely to increase over the next decade and will speed up the doomsday dates for the cities and states. Here is the list.
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The red line shows the government’s estimate. The purple line is the actual cost.
The first total municipal pension default happened last week: Prichard, Ala. ran out of money stopped mailing pension checks.
Hundreds of cities could be right behind. Projections by Robert Novy-Marx and Joshua Rauh [PDF] show the average city has $15,000 per household in unfunded pension liabilities. These massive liabilities are ignored by common government accounting (see chart).
Insolvency means benefit cuts or borrowing from the already-near-broke states.
Many of the 77 cities surveyed by Novy-Marx and Rauh are facing insolvency within the next decade. Other small cities like Prichard could go even sooner.
Mayor Mike Moncrief
Image: ap
Unfunded liability: $2 billion
Unfunded liability per household: $7,212
Solvency horizon: 2023
Source: Robert Novy-Marx and Joshua Rauh [PDF]
#9 Detroit
Mayor David Bing
Unfunded liability: $6.4 billion
Unfunded liability per household: $18,643
Solvency horizon: 2023
Source: Robert Novy-Marx and Joshua Rauh [PDF]
#8 Baltimore
Mayor Stephanie Rawlings-Blake
Unfunded liability: $3.7 billion
Unfunded liability per household: $15,420
Solvency horizon: 2022
Source: Robert Novy-Marx and Joshua Rauh [PDF]
#7 New York City
Mayor Michael Bloomberg
Unfunded liability: $122.2 billion
Unfunded liability per household: $38,886
Solvency horizon: 2021
Source: Robert Novy-Marx and Joshua Rauh [PDF]
#6 Jacksonville
Mayor John Peyton
Image: ap
Unfunded liability: $4 billion
Unfunded liability per household: $12,994
Solvency horizon: 2020
Source: Robert Novy-Marx and Joshua Rauh [PDF]
#5 St. Paul
Mayor Chris Coleman
Image: ap
Unfunded liability: $1.4 billion
Unfunded liability per household: $13,686
Solvency horizon: 2020
Note: These numbers refer to St. Paul’s largest pension, a teachers fund.
Source: Robert Novy-Marx and Joshua Rauh [PDF]
#4 Cincinnati
Mayor Mark Mallory
Image: ap
Unfunded liability: $2 billion
Unfunded liability per household: $15,681
Solvency horizon: 2020
Source: Robert Novy-Marx and Joshua Rauh [PDF]
#3 Boston
Mayor Thomas Menino
Image: ap
Unfunded liability: $7.5 billion
Unfunded liability per household: $30,901
Solvency horizon: 2019
Source: Robert Novy-Marx and Joshua Rauh [PDF]
#2 Chicago
Mayor Richard Daley
Image: ap
Unfunded liability: $44.8 billion
Unfunded liability per household: $41,966
Solvency horizon: 2019
Source: Robert Novy-Marx and Joshua Rauh [PDF]
#1 Philadelphia
Unfunded liability per household: $16,690
Solvency horizon: 2015
Source: Robert Novy-Marx and Joshua Rauh [PDF]
BONUS: These cities are also facing pension apocalypse
2026: Dallas
2027: Houston, Los Angeles, Miami, San Jose
2028: Memphis, Milwaukee
2031: Tacoma
2032: San Francisco
Source: Robert Novy-Marx and Joshua Rauh [PDF]
Just like cities, state pensions are running out of money.
Spellchek 
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