The municipal pension crisis is like the social security crisis but worse: Unlike the federal government, cities cannot legally go into debt.
This imminent disaster is described in a new paper out by Robert Novy-Marx and Joshua Rauh [PDF].
Novy-Marx and Rauh say most cities are burdened with unfunded liabilities, which are ignored by common accounting methods (see chart). Unfunded liabilities equal around $15,000 per household nationally, and up to $41,000 per household in some cities.
These cities are running out of money and will have to raise revenue or cut benefits to stay solvent.
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