It's the growing problem that no politicians want to talk about: unfunded pension liabilities. Business Insider ran an article last year which focused on the many upcoming challenges facing U.S. retirement funds. However, the pension problem is especially scary. From the article:
"The unfunded liabilities of the various federal employee pensions systems, covering civilian and military employee benefits, amount to about $3.5 trillion, or 20% of US GDP," a release from Moody's said Wednesday.
"Additionally, Moody's estimates that unfunded state and local government pension plan liabilities are of the same magnitude, bringing the total shortfall to 40% of GDP."
Now, federal pensions are relatively safe -- if there's a significant economic downturn the Fed can always print more money to keep those plans afloat. However, the states and local governments aren't so lucky. That collective $3.5 trillion can't simply be printed out of thin air -- it'll have to come from somewhere.
If a long-term solution isn't achieved, millions of people may suddenly find themselves without the monthly pension check their retirement had been counting on. It's a crisis in the making.
Illinois is in perhaps the worst shape, and recently the issue of unfunded pensions has been getting some badly-needed press. In fact, the Chicago Tribune has dedicated an entire investigative series to the story.
However, if meaningful reform isn't instituted nationwide, Illinois will simply become the canary in the coal mine.
What reasonable steps can state and local governments take to address the issue? Cutting current plans is a start, but there is a ton of ground to be made up.