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URL:  http://boards.fool.com/another-question-that-might-be-worth-speculating-22937061.aspx

Subject:  Re: Is the pension worth it? Date:  8/24/2005  9:12 PM
Author:  mcain6925 Number:  47407 of 75335

Another question that might be worth speculating about is "How reliable is the pension?" A number of municipal governments -- Houston, Philadelphia, San Diego -- have pension funds that are in considerable trouble. San Diego, both the city and the county, are being sued by pensioners demanding that they make the necessary additional contributions to make the the pension fund "whole" in the near term. If they lose the case, both will be bankrupt. There is not much case law on municipal bankruptcies, and no one is sure exactly what claims the municipal pension fund has on future tax revenue in the case of such a bankruptcy.

Here in Colorado, the public employees' pension fund is on the order of $10B short of what would be needed to fund their obligations under the current set of assumptions about future returns (although if they can earn 10.5% on their principal, they're good). Given the various other constitutional restrictions on taxing and spending in Colorado, if the state or various other contributors to the fund were suddenly required to make the fund whole in a short period, they would be either technically bankrupt, or required to cease funding the state colleges and universities, much of the road work, and the entire prison system. I'm not sure there's any case law on what happens if a state declares bankruptcy. I'm not even sure if they can.
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