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« Like Paulson With TARP, An Offer BP Couldn’t Refuse | Main | FLASH CRASH: Move Along, Nothing To See Here, Our Machines Work Perfectly »
Thursday
Jun172010

State pensions becoming federal issue; Bailout cost potentially more than $3 Trillion

And if the U.S. stock market doesn't return to old highs soon, the problem is going to get much worse, very quickly.

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Source: Financial Times

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Illinois used to have a plan to pay off the gaping shortfall in the pension funds that pay retired teachers, university employees, state workers, judges and politicians, Dan Long recalls.

Mr Long, director of the Commission on Government Forecasting and Accountability, the non-partisan auditing arm of the Illinois state legislature, remembers that, back in 1994, the state laid out a proposal that would have paid off most of what was then a $17bn gap by 2011.

But Illinois could not stick to the plan.

With financial year 2011 less than six weeks away, the pension arrears of the 1990s look quaint. Instead of a balanced system, 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.

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Related:

PENSION TIMEBOMB: State pension funds have $1 trillion shortfall - Pew Report

 

 

 

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Reader Comments (14)

May 21, 2010 at 2:08 AM | Registered CommenterDailyBail
Lloyd Blankfein Made Obama "The Angriest He's Been All Year"

http://www.latimes.com/entertainment/news/la-et-rutten19-20100519,0,4056387.story
May 21, 2010 at 2:16 AM | Registered CommenterDailyBail
May 21, 2010 at 2:27 AM | Registered CommenterDailyBail
GOSHEN, Ind. — An Indiana state senator and tea party favorite who finished second in the Republican U.S. Senate primary will get a second shot at Washington thanks to the resignation of his former boss, Rep. Mark Souder, who is quitting over an affair with a part-time staffer.

But almost immediately after he announced his political comeback, Republican Marlin Stutzman had to spend part of his first day of the campaign fielding questions about whether his team was involved in making public long-running rumors about the affair that brought Souder down.

Stutzman, considered by many a front-runner for the GOP nomination for the seat, said Thursday that his campaign did not spread word of the affair and disputed that he had more to gain from Souder's fall than others. He called any suggestion that his campaign had a role a "smear tactic."

"They're definitely coming after us because they know we have a chance to win this seat," said Stutzman, who once worked as a district assistant for Souder and is also friends with the family of the married, part-time aide.

http://www.huffingtonpost.com/2010/05/20/tea-party-favorite-marlin_n_583396.html
May 21, 2010 at 2:28 AM | Registered CommenterDailyBail
Is this what will spark the riots on Main Street? That's my guess, just like Greece.
May 21, 2010 at 2:29 AM | Unregistered CommenterZarathustra
Could be...i assume you mean when the rest of us are asked to bailout state pensions..?...or do you mean when state pensions get cut and state workers take to the streets in protest...i suppose either could happen...
May 21, 2010 at 2:45 AM | Unregistered CommenterDailyBail
"Is this what will spark the riots on Main Street? That's my guess, just like Greece. "

They will first choose the "noble" thing to do first... America is 6% of the world population, consuming over 60% of the global supply in antidepressants. Expect that trend to increase, and buy stocks in pharmacueticals.

Follow painkiller use as well, blame it on the "weakness" of all that royal DNA floating around out there...
May 21, 2010 at 8:48 AM | Unregistered CommenterS. Gompers
“The federal government could be on the hook.”

Or the states could simply default on their pension obligations. It's not like I'm going to see my $1,600 month from Social Security 9 years from now.
Jun 17, 2010 at 11:56 PM | Unregistered CommenterJohn S
KISSINGER AT BILDERBERG 2010

Bilderberg 2010: Don’t call it a pow-wow!

http://www.prisonplanet.com/bilderberg-2010-dont-call-it-a-pow-wow.html

NEW WORLD ORDER WITH OBAMA'S HELP...

http://www.youtube.com/watch?v=4gtmnreOmzI&feature=related

It's almost like he knew...WHAT? COME AGAIN...oh, HE HELPED PLAN IT.

WATCH HIS HEAD CLOSELY, I THINK I CAN SEE HIS DEVIL HORNS.
Jun 18, 2010 at 1:49 AM | Unregistered CommenterZarathustra
John wrote:

Or the states could simply default on their pension obligations. It's not like I'm going to see my $1,600 month from Social Security 9 years from now.

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That is what i wish would happen...i fear an endless bailout for states like cali, ny and illinois...
Jun 18, 2010 at 11:34 PM | Registered CommenterDailyBail
zara...i saw the cop-jaywalking clip yesterday...on drudge i think...unbelievable...

kissinger clip and links to my bilderberg guide are here:

http://dailybail.com/videos/henry-kissinger-talks-about-the-new-world-order-bushs-legacy.html
Jun 18, 2010 at 11:45 PM | Registered CommenterDailyBail
Soon the bailouts will need their own bailouts. Wait a minute; we're ALREADY doing that too!.

Never mind.
Jun 23, 2010 at 4:09 PM | Unregistered CommenterRecoverylessRecovery
rlr...clarke & dawe handled that issue...i'm sure you saw it...
Jun 24, 2010 at 11:51 AM | Registered CommenterDailyBail

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