According to the “Financial Times”, public pensions are facing a $2,500 billion deficit due to chronic underfunding of retirement obligations and the severe US economic recession. As far back as 2008, the Pew Center on the States estimated a funding gap of at least $1,000 billion for pension, healthcare and other non-pension benefits like Medicaid. The most likely ways to bridge this money gap are through a sale of assets, issuing bonds, and legislative intervention. All of these possibilities have a downside.
With a sale of assets there will be increased privatization. Some of the states’ most vulnerable citizens could see a cut in assistance payments or none at all. Pension liabilities are not included in state and local government debt figures further increasing the chance that other measures may not be enough to avoid default. Annual pension funding requirements this year pose a problem for a number of states. Illinois, already challenged in efforts to fund their annual budget, hopes to issue $3.7 billion in bonds to meet their pension obligation putting them even further in debt. States do have an interest in their major municipalities not defaulting. Some state legislatures have advanced money to fund shortfalls. However, legislative intervention is spotty and many states don’t have the extra funds or, considering current economic issues today, the inclination to help out.
Page Perry, is an Atlanta-based law firm with over 125 years of collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have assisted dozens of investors in recovering over $130 million from brokerage firms since 2005. Page Perry’s attorneys are actively involved in counseling institutional and individual investors regarding their investment problems. For further information, please contact us.