Even as a relief bill is expected to be introduced in Congress today, if it passes and works, Puerto Rico will not be able to pull out of its financial tailspin for years, according to a commentary in today’s New York Times. Across America, dozens of cities, counties and states may be heading down the same financial rabbit hole. Illinois, New Jersey, Philadelphia, St. Louis and Jacksonville, Fla., to name just a few, are all facing their own slowly unspooling financial disasters. The blame lies with what economists call “deferred costs.” Generous pension promises made decades ago, without enough funding, are now coming due as baby boomers retire. Bonds issued in the distant past to build bridges, highways and other projects also must be paid — even as the projects themselves could by now use expensive makeovers, according to the commentary. “New York City has $85 billion of retiree health obligations all by itself,” said Richard Ravitch, the former lieutenant governor of New York State and an informal adviser to Detroit’s financial control board. He helped New York City resolve its financial crisis in 1975; today he worries about possible replays across America. “We’ve promised more than we can pay without confiscatory levels of taxation,” Ravitch said. “Puerto Rico is just, arithmetically, the most egregious example of borrowing to cover up deficits.” Read more.
What are the next steps for Puerto Rico to resolve its financial distress? A panel of experts at ABI’s New York City Bankruptcy Conference tomorrow will examine potential remedies. Click here to register.
What do experts think of the mounting crises in public and private pensions? Watch the latest “Eye on Bankruptcy” segment that was filmed live at ABI’s Annual Spring Meeting in April.
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
