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US state pensions becoming federal issue
At current rates retired state workers will get paid more annually than employed state workers. This is worse than the GM Union problem. I smell more bail-outs. Buy gold on the dip.
the state faces unfunded liabilities of about $78bn, the biggest pension hole in the US, and contributions of more than $4bn for 2011, the largest single element of its $13bn budget deficit.
Illinois is the poster child of unfunded pensions in the US. But state retirement systems could become a national concern, new research shows.
Joshua Rauh, associate professor of finance at the Kellogg School of Management at Northwestern University said that, without reform, some state pensions might run out within the decade. By 2030, as many as 31 states may not have the money to pay pensions. And, if these funds exhaust their assets, the size of payments for the benefits they have promised will be too large to cover through taxes, putting pressure on the federal government for a bail-out that could potentially cost more than $1,000bn, he says.
It is more than a local problem, Mr Rauh said. The federal government could be on the hook.
Estimates put the unfunded liabilities at between $1,000bn and $3,000bn after years of states promising benefits but not contributing enough in both good times and bad to cover them.
At current rates retired state workers will get paid more annually than employed state workers. This is worse than the GM Union problem. I smell more bail-outs. Buy gold on the dip.