usUS cities and states face a “looming crisis” after the collective funding hole in the public pension system jumped by $434bn in just one year, raising fears of further Detroit-style bankruptcies.

According to academic research shared exclusively with FTfm, US public pension funds lack $3.85tn that they need to pay the retirement benefits of current and retired workers.

Joshua Rauh, author of the research and a professor of finance at Stanford Graduate School of Business, said: “[The large deficit in US public pensions] is a looming crisis. It is particularly a near-term issue for a number of cities.”

The situation is especially difficult for cities such as Chicago, which Mr Rauh estimates has unfunded pension liabilities that equal 19 years of the city’s tax revenues.