http://www.cnbc.com/id/39626759
More bailouts for bondholders coming to a city or state near you?
Big US cities could be squeezed by unfunded public pensions as they and counties face a $574 billion funding gap, a study to be released on Tuesday shows.
“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 financial demands of unfunded pension promises come as state and local governments grapple with years of falling tax revenue related to the recession.
The combination has raised concern that defaults, which are historically rare in the $2,800 billion municipal bond market where local governments obtain money, could now rise.
“The bondholders would be competing with the pension beneficiaries for scarce government resources,” Mr Rauh said.
