While the federal government has the ability to operate in the red, states and cities do not.
And that is no easy task.
One of the biggest problems facing these states is unfunded pension liabilities for public workers, especially teachers.
A majority of states' teacher retirement funds are underfunded, some significantly so, according to the National Council on Teacher Quality.
And with a million teachers set to retire over the next decade, the situation is stoking fights across the country.
Typically a pension plan is considered healthy if it meets an 80 percent funded benchmark.
More than 30 states have pension plans for teachers below that benchmark.
Nine are below 60 percent.
And Illinois, Rhode Island and West Virginia are funded below 50 percent!
So states are taking action.
Kansas wants to transfer new teachers and other government workers to a 401(k) style plan to help close a nearly 8.5 billion dollar gap.
California, where the pension fund is more than 50 billion dollars under-funded, is proposing employees (including teachers) contribute to at least 50 percent of their retirement costs, and all new employees would be moved into a hybrid plan that blends a pension with a 401(k).
But the most drastic move in the golden state would be to raise the retirement age to 67.
And the retirement age is a big part of the problem.
With the nation's life expectancy nearing 80 years old, the costs of paying for these pensions - with taxpayer dollars no less! - is skyrocketing.
And it doesn't help that the benefits are much more generous than in the private sector.
In all but six states, it is possible for teachers to begin collecting full retirement before age 65.
And in three states, Montana, Alabama, Kentucky, teachers can retire in their 40s.
Thankfully, Alabama is working to raise the age to 62.
If successful, that's a huge change for teachers, but it makes a huge difference.
Look at New Mexico. Right now, teachers can collect full retirement benefits at age 52.
If they’d raise the age to 65, the state could save on average $734,000 dollars per retiree!
That would go a long way in filling the $6 billion dollar gap in the pension fund.
Now, I’m not coming down on teachers. They have an incredibly important job that is in no way easy to do.
And it's not just teachers that are draining our pension funds. It's all public workers.
Teacher pensions are just a fraction of the more than $660 billion dollar shortfall in public, state and local pensions nationwide.
But the state of New York is doing something about it.
This week the state approved pension reform that will save $80 billion dollars over 30 years.
The new law creates a sixth tier of smaller benefits for future retirees, raises retirement plan contributions by up to six percent,
and the retirement age gets bumped a year to 63.
Also, only $15,00 dollars of a worker's overtime can be used to calculate benefits.
It's the worst kept secret in the public sector. If you rack up the overtime in the last year or two of working, your pension will soar.
These are huge moves for New York where pension costs are of course rising, but the empire state's pension fund is actually fully funded.
It's time states like Illinois and West Virginia take notes.
Reform can be done. Not everyone is going to like it, but sacrifices have to be made, and reality has to be faced.