Puerto Rico publicly confessed that its debts are “not payable.” Many US states are in the same situation if their pension obligations are taken into account. Even using generous 7-8% assumptions of future returns, many states have substantially underfunded their state retirement plans. Worse, some state pension plans have issued bonds so that they can juice returns via leverage. But when actual expected returns are less than zero (see Hussman) the pensions are simply “not payable.”
See here for some previous comment on this problem.