America’s housing and derivatives crises may be behind us, but another ticking time bomb looms just ahead in the many severely underfunded state and local government employee pensions. Cities and counties alone face an estimated $574 billion in unfunded public pension liabilities, a recent Northwestern University study found. Philadelphia ($9.7 billion in unfunded liabilities), Boston ($7.5 billion) and Chicago ($44.8 billion) are all projected to run out of pension money by the end of this decade. Their problems only compound the multitrillion-dollar problem of unfunded state pensions.
Estimates of the problem’s true size vary, because the governments with the biggest shortfalls often try to conceal their dire circumstances. In jurisdictions across America, pension funds attribute unrealistic values to investments and assume unrealistic rates of return. They protect themselves with exemptions from freedom of information laws, or even withhold information despite those laws.
