One of the extremely tough things about pension liabilities, is that they are costs with present benefit -- they a labor costs from labor performed decades ago. As a state, you cannot even expect that the pensions paid will be spent in your state. Since theses are typically states or municipalities they lack the sovereign ability to print money, and they face the problem that it is relatively easy (versus a nation state) to leave their taxing jurisdiction. This is especially true especially with income tax increases -- those most impacted are also those with the greatest mobility.
That is why the Federal government's response to the Detroit bankruptcy is so important. Are the rest of us going to be on the hook for the unfunded munis or not?
That is why the Federal government's response to the Detroit bankruptcy is so important. Are the rest of us going to be on the hook for the unfunded munis or not?