Speaking at a Municipal Securities Regulator Summit, SEC Commissioner Daniel Gallagher warned that the unfunded pension and health care obligations of states and municipalities could be much worse than people realize. Because of unrealistic estimated returns, the unfunded liabilities range from $1-$4 trillion, he said, not counting what is owed for the health care costs of workers in retirement. In fact, Gallagher said that each household would have to pay $14,000 for 30 years to fund the gap.
As a result, Gallagher stated, some muni bond issuers are misleading investors by failing to disclose the true nature of these liabilities, with trillions of dollars not reflected on the books. Raising the question of whether states and municipalities are treated differently, Gallagher said that plan fiduciaries recklessly seeking returns to make up shortfalls would be pursued by the SEC for fraud. Who elected these people?
