Step forward, California and Illinois! Your state and local pension funds are so badly funded that you two states, alone, account for about one-third of the entire U.S. pension-fund crisis.
California’s public-sector pensions have a staggering accounting hole of $274 billion, according to the latest report from the Equable Institute think tank. Illinois public-sector pensions are in the hole to the sum of $210 billion — and you could argue that is even more remarkable because Illinois, the U.S.’s sixth most populous state, has just one-third the population of California, by far the biggest U.S. state by population. Illinois pension funds have only half the assets they need, according to the report. That’s right: They’re 50% funded. Only little Kentucky — at 47% funded — is in worse shape. “Most state and municipal pension plans in the U.S. are distressed or fragile,” Equable reports. For it, “fragile” means less than 90% funded. “Distressed” means less than 60% funded. In total, the accounting holes in America’s state and local pension funds jumped by nearly half last year to $1.45 trillion. The overall funding ratio fell from 84% to 77%. Meaning, in other words, that America’s state and local politicians have committed to $1.29 in payouts for every $1 in plan assets. That is going to set up clashes sooner or later among taxpayers, state and local employees and retirees, and investors in municipal bonds. The city of Detroit ended up in bankruptcy in 2013. …