The Collective Funding Shortfall of US Public Pension Funds Is THREE TIMES LARGER than Official Figures Showed, and Is Getting Bigger

We’ve reported for 8 years that U.S. pension shortfalls were a grave crisis.

The Financial Times reported yesterday that things are indeed bad:

The US public pension system has developed a $3.4tn funding hole that will pile pressure on cities and states to cut spending or raise taxes to avoid Detroit-style bankruptcies.

According to academic research shared exclusively with FTfm, the collective funding shortfall of US public pension funds is three times larger than official figures showed, and is getting bigger.


Large pension shortfalls have already played a role in driving several US cities, including Detroit in Michigan and San Bernardino in California, to file for bankruptcy. The fear is other cities will soon become insolvent due to the size of their pension deficits.


The Stanford study found that the states of Illinois, Arizona, Ohio and Nevada, and the cities of Chicago, Dallas, Houston and El Paso have the largest pension holes compared with their own revenues.


Olivia Mitchell, a professor at the Wharton School at the University of Pennsylvania, told FTfm last month that US public pension plans face “grave difficulties”.

“I do believe that US cities and towns will continue to suffer, and there will be additional bankruptcies following the examples of Detroit,” she said.


Mr Rauh’s study claims the “true extent” of funding problems in US public pension system has been obscured because plans calculate both their costs and liabilities on the assumption they will achieve returns of between 7 and 8 per cent a year. The academic believes this rate is “wildly optimistic and unlikely to be achieved”.

Mr Rauh said a more realistic return rate, based on US Treasury bond yields, was around 2-3 per cent a year.

In other words, underfunded pensions are a ticking time bomb …

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  • MrLiberty

    How will those working for the productive sector (versus the parasitic sector) respond when the government raises income taxes, replaces their stocks, etc. with worthless T-Bills, raises property taxes, etc. all to pay for the unsustainable promises and fiscal mismanagement that this unfunded situation represents? Has it not been bad enough that the salaries and benefits up to this point have been stolen from us all? I would look forward to the “main event” if I were not a likely victim of more government theft.

    • Brockland A.T.

      How do people usually react to a big gun pointed at their head?

  • jadan

    Still there are those that would like to reduce government to a size that can be drowned in a bathtub, privatize social security, the post office, and every government function that could be stripped for private profit. Public pensions are just another profit opportunity for Wall Street parasites. Americans cannot command their own government. It inspires fear and loathing because it is not, in truth, their government by and for the people. It has become a tool for the wealthy minority. We have no democracy. That is why the public sector is in dire straights. Too much of the government has been privatized. The financial system that is the primary tool to service the public welfare, is a private corporation that serves banks and billionaires. The public debt is owed to these banks and billionaires. The tax payers bailed them out last time, did they not? We will soon confront a disastrous situation when this private financial system collapses. To avert suffering on a mass scale, we have to take back our government and put an end to the privatization mania. We have to eliminate the Fed. There is no lack of vision for a way out of this colossal mess. There is obstruction from an ideologically bankrupt Republican Party that has managed to roll back the New Deal. These fools simply cannot understand the meaning of the public welfare that is at the core of our Constitutional system. Will it take mass suffering and misery for the American people to begin to take political responsibility for themselves and begin to think in terms of the public interest?

    • Brockland A.T.

      Please use paragraphs; makes it easier to read your valuable points.

  • diogenes

    The state of California has somewhere between 600 billion and 3 trillion dollars in “reserves” and pension funds etc. that it essentially GIVES to big banks and Wall Street predators to “manage” for substantial fees and paltry returns. Every state in the Union except South Dakota is in exactly the same boat. So is the Federal Government. Private control of public finance is a disaster for the public and a boondoggle for private predators. Is this surprising? Is it surprising that the Financial Times says nothing about any of this? Is it surprising that not two Americans in 100 have the least idea about any of it? Vampires drug their victims. Time to drive a spike through the heart of every Wall Street operative and all their hirelings, shills, pimps and enforcers.

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