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Cities, Counties Join States in Race to the Bottom

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The FT reports that a study released today by the Kellogg School of Management at Northwestern University and the University of Rochester shows that "Big US cities could be squeezed by unfunded public pensions as they and counties face a $574bn funding gap."

That's in addition to $3 trillion in unfunded liabilities already estimated for state-run pensions.

“What is yet to be seen is how this burden will be distributed between state and local governments and whether the federal government will be called upon for bail-outs,” said Joshua Rauh of the Kellogg School.

The study notes that:

Current pension assets for plans sponsored by Philadelphia can only pay for promised benefits through 2015, while Boston and Chicago would deplete their existing funds by 2019.

Cincinnati, Jacksonville, Florida and St Paul have current pension assets that can only pay for promised benefits through 2020.

“The fact that there is such a large burden of public employee pensions concentrated in urban metropolitan areas threatens the long-run economic viability of these cities, as residents can potentially move elsewhere to escape the situation,” Rauh said.

Coincidentally, Alan Hevesi, the former Comptroller of the State of New York--and a resident--will actually be moving elsewhere shortly.

To prison.

Hevesi, the man who ran New York's pension fund, pleaded guilty last week to a felony corruption charge, after his office was caught steering pension fund investments to friends and political associates and received large amounts of cash, campaign donations, and free trips in return.

Hevesi admitted violating "my fiduciary and other duties as a state public official" and will live the rest of his life as a convicted felon.

But, for Hevesi, all is not lost.

Due to a quirk in New York State law, the former Comptroller will...wait for it...wait for it...keep his $105,221/year pension.
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