Unfunded Obligations

The City of Coral Gables has many financial issues for the future that are being experienced in nearly all cities and towns in the U.S., especially unfunded pensions and health benefits. Commentary in the Wall Street Journal today helps understand this huge overhanging local debt in U.S. that will have to paid in the future at a cost in reduced services and increased taxes (or both).

State and local governments are amassing huge obligations in the form of unfunded retirement benefits for their workers. Aside from underfunded pension plans, governments have also run up large obligations from their retiree health plans. While a new Governmental Accounting Standards Board rule will kick in next year and reveal exactly how large this problem is, we estimate that retiree health benefits are a $1.4 trillion fiscal time bomb.