A study by Northwestern University’s Kellogg School of Management calculates the combined underfunding of pensions in all municipalities at $574 billion. States have an estimated $3.3 trillion in unfunded pension liabilities.
Nunes says 10 states will exhaust their pension money by 2020, and all but eight states will by 2030.
States’ troubles are becoming bigger. Hitherto, local governments have acquired infusions of funds from federal budget earmarks, which are now forbidden. Furthermore, states are suffering “ARRA hangover” – withdrawal from the American Recovery and Reinvestment Act, aka the 2009 stimulus.
There are legal provisions for municipalities to declare bankruptcy. Some have done so. As many as 200 are expected to default on debt next year. There are, however, no bankruptcy provisions for states.