The Coming State Government Budget Implosion

State debt and unfunded liabilities have risen to an estimate $4.2 trillion, much of it in unfunded pension obligations.  That is nearly six times total state tax collections of all sorts (license fees, property taxes, sales taxes, income taxes, etc) putting the states close to Greek territory.  And I cannot tell from the methodology here, but $4.2 trillion likely underestimates unfunded obligations because many states have unrealistically high return expectations for their pension investment portfolios.


  1. HenryBowman419:

    Joshua Rauh of Northwestern University's Kellogg School of Management has tried to estimate when most state's pension funds will run dry. His results are interesting (e.g., Illinois out of money in 2018, CT, IN, NJ 2019, etc) -- he has been studying such for a while. His results, though, assume investment returns of 8 per cent -- good luck with that these days!

    The states will run out of money, for the taxpaying voters will rebel, at least in most places (California voters may simply be too stupid). The real question is whether the Feds will simply print money to bail them out (the Bernanke solution to everything), or let the states restructure their messes. We know what B.O. will do: he'll bail 'em out, at least as long as they reliably vote Democrat (notably, most of the states slated to run out first are run by Dems).

  2. mesaeconoguy:

    So Meredith Whitney was right, in the medium run.

    In the long run, Keynes is still a moron….

  3. mesaeconoguy:

    Notice to any and all state bankruptcy litigants:

    If you try to deflect fiduciary responsibility, and attempt
    to monetize your fiscal irresponsibility across the sovereign states via a nonexistent
    state bankruptcy process, I will sue you, and have my friends at Goldwater do
    the same.

    This means you, Pat Quinn, Jerry Brown, Barak Obama, et al.

  4. Craig Limesand:

    Illinois teachers and Missouri state employees just downgraded their rate of return estimates... TO 8%.