A small, dying Alabama town may set the standard for municipalities across the country that are dealing with budget shortfalls that have put a great strain on their pension funds.
Prichard is located in south Alabama on the outskirts of Mobile. It was warned years ago that if it didn’t change the way it was handling its finances, its pension fund would run out of money by 2009. It did. That’s when Prichard did something that pension experts say they have never seen before: It stopped sending monthly pension checks to its 150 retired workers, breaking a state law, according to a report in The New York Times.
As could be expected, this has put retirees in a financial jam and caught the attention of struggling cities like Philadelphia and in states like Illinois, where pension funds are under great strain, the news source said.
“Prichard is the future,” said Michael Aguirre, the former San Diego city attorney, who has called for San Diego to declare bankruptcy and restructure its own outsized pension obligations. “We’re all on the same conveyor belt. Prichard is just a little further down the road,” he told The Times.
The resulting legal case could determine the fate of the pensions of thousands of municipal and state workers across the country.