States Face $2.5 Trillion Pension Shortfall

January 17th, 2011
in News, Banking

Financial Times:  US public pensions face a shortfall of $2,500bn that will force state and local governments to sell assets and make deep cuts to services, according to the former chairman of New Jersey’s pension fund.

Follow up:

“States face cost pressure, most prominently from retirement benefits and Medicaid [the health programme for the poor],” Orin Kramer told the Financial Times. “One consequence is that asset sales and privatisation will pick up. The very unfortunate consequence is that various safety nets for the most vulnerable citizens will be cut back.”

Mr Kramer, an influential figure in the Democratic party and still a member of the investment council that oversees the New Jersey pension fund, has been an outspoken critic of public pension accounting, which allows for the averaging of investment gains and losses over a number of years through a process called “smoothing”.

The severe US economic recession has cast a spotlight on years of fiscal mismanagement, including chronic underfunding of retirement promises.

Read more at the Financial Times.....

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