U.S. Cities, States Facing Pension Deficits

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Some states along with some major U.S. cities are facing a debt crisis. They have not been able to continue to fund their employee pension plans.

The Financial Times reported that a new study found some cities still owe $574 billion on their pension plans and some states owe almost $3 trillion.

"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 of Management at Northwestern University.

For example, current pension assets for plans sponsored by Philadelphia, Pa., can only pay for promised benefits though 2015. Boston, Mass., and Chicago, Ill., would run out of existing funds by 2019.

"Philadelphia has the most immediate cause for concern, as the city can pay existing promises with existing assets only through 2015," Mr Rauh said

Some analysts said the huge debts could force some cities to default on their municipal bonds or Washington may have to step in with a bailout.

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