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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
Originally posted by Ex_MislTech
As Mr. Perkins said, this is all by design.
Originally posted by Vitchilo
Could you post the entire article?
I'm not a member at FT and I can't see a thing.
Even if they continue to rake in the projected 8% in annual returns, pension funds in at least seven states -- Illinois, Louisiana, New Jersey, Connecticut, Indiana, Oklahoma, and Hawaii -- could dry up by 2020, and 31 states could be in trouble by 2030, according to a recent study by Northwestern University economist Joshua Rauh.
Promised benefit payments are so astronomical that raising taxes would still fall short. The only solution would be to call on the federal government for a bailout, according to the study.
"This is a problem of monumental proportion," said Rauh, an assistant professor of finance at the Kellogg School of Management. "Given that we see the same issue in many states, the total size of a federal rescue plan could exceed the seriousness of the recent economic crisis and potentially cost more than $1 trillion total."