The first total municipal pension default happened last week: Prichard, Ala. ran out of money stopped mailing pension checks.Hundreds of cities could be right behind. Projections by Robert Novy-Marx and Joshua Rauh [PDF] show the average city has $15,000 per household in unfunded pension liabilities. These massive liabilities are ignored by common government accounting (see chart).
Insolvency means benefit cuts or borrowing from the already-near-broke states.
Many of the 77 cities surveyed by Novy-Marx and Rauh are facing insolvency within the next decade. Other small cities like Prichard could go even sooner.
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