Last Friday's Wall Street Journal featured a staff editorial describing the financial woes of Hamtramck, Michigan.
Towns in Michigan apparently require the state's permission to file for bankruptcy, and Hamtramck is so seeking. The editorial cites the town's $3MM deficit on its $18MM budget. According to the article, million-dollar deficits have been recurring for the past 10 years to fund lavish union compensation and benefits.
But the latter paragraphs of the editorial contain stunning figures.
"Municipalities nationwide are running a $574 billion unfunded pension liability, on top of $3 trillion in state unfunded liability. Philadelphia's pension fund is set to run dry in 2015 and Boston's in 2019, when over half of the city's revenue will be dedicated to pensions."
These are staggering sums, and, when added to federal deficits, produce astounding levels of per capita indebtedness for US citizens. Moreover, knowing that large US cities are facing totally-exhausted pension funds before the end of the decade is sobering.
You can't avoid realizing that there will have to be a general reduction of expectations by US citizens regarding government-provided pensions and pensions to state and municipal employees. Unaffordable promises were struck in the past which simply won't be met by the working public's taxes. Either pensions get trimmed, and/or converted to defined-contribution plans, like the private sector, or cities and states are going to file for bankruptcy protection, in order to forcibly alter those pension plan terms.
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