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About 80% of them are defined benefit plans, meaning monthly payments are guaranteed, but can insolvent states and municipalities comply, especially given years of under-funding, fewer contributing workers at lower pay, and continuing large budget cuts, including mass layoffs and reduced benefits making a bad situation worse.
Enough for University of Chicago finance professor Robert Novy-Marx and Northwestern University's Joshua Rauh to estimate a $3 trillion + pension funding gap for states alone, and if economic conditions worsen, who knows how much higher, or if millions of retirees will, in fact, get promised benefits, despite guarantees and taxpayers hit for the shortfall.
Corporations renege on Defined Benefit Pension Plans (DBPP) by cutting benefits, switching to Defined Contribution Pension Plans (DCPP), or going bankrupt and eliminating them entirely with the help of obliging courts. So why not states and municipalities, especially given to how close to the edge they are, forcing once unthinkable actions with sweeping consequences.
What's happening regionally and locally arrived in America from reckless policies creating unsustainable rising debt levels - "debt peonage" for economist Michael Hudson that "can't be repaid." It's the core problem, and no evidence shows "countries simply grow out of their debts," according to University of Maryland Professor Carmen Reinhart and Harvard's Kenneth Rogoff, or borrow their way out for Michael Hudson. When the going gets tough, some default, others inflate, but most rely on spending cuts and higher taxes, making people pay for political indiscretions - make that crimes.
Washington may impose higher taxes and devalue the dollar, but mostly expect benefit cuts, the idea being to end core ones including Medicare, Social Security, eventually Medicaid, plus others millions rely on but won't get if tough measures are enacted. Expect them. Some are here. Others are coming through the same structural adjustments imposed on developing countries and just as painful and destructive.
Definitions
One calls structural adjustment programs (SAPs) "a series of economic policies designed to reduce the role of government," replacing its obligations with market incentives - in other words, privatize.
BusinessDictionary.com calls it "change effected in the basic framework of an economy by the impact of policy reforms, such as 'liberalization' of the economy by reducing protectionism and state intervention" - in other words, what government does, business does better so let it.
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