Watching Zohran Mamdani spar with New York’s largest taxpayers and employers has been humorous, revealing the political naivete of Big Apple’s freshman mayor. I’m trying to imagine Indya Kincannon or Glenn Jacobs running television ads criticizing Jim Haslam, Jim Clayton, or Randy Boyd for not paying their fair share to make Knoxville a functioning community.

It is safe and easy to find the New York situation amusing, as long as it stays in New York. But it raises a fair question: is there any issue that could cause a similar “budget hole” in Knoxville?

My growing concern about a potential local fiscal challenge is similar to one of the federal government’s biggest long-term problems: pensions. As of July 2025, the city of Knoxville reported accumulated pension liabilities of just over a billion dollars, but held only $759 million in pension assets, leaving the system underfunded by approximately $277 million. The plan’s funded ratio (assets as a percentage of liabilities) stood at 73.3%.  The average public pension plan in the US was 80.2% funded in 2024, so Knoxville sits below the national average, though far from the worst cases.

Among the most troubled systems is the Chicago municipal employees’ pension, which is barely 25% funded. And if you really want something to worry about, the best estimate for Social Security’s funded percentage is about 10%. (Social Security does not publish traditional pension funding metrics.)

Knoxville’s pension issue is not a new problem. Prior to 2009, the plan was more than 90% funded—until suffering an approximate 20% investment loss in 2009. That was the last time the plan’s funded ratio exceeded 90%. Since then, it has been a fairly steady decline from 93.1% to the current level of 73.3%

Ignoring a problem often results in a larger and more expensive problem. Knoxville’s current unfunded liability of $277 million was only $38.5 million in 2009. You can fund a lot of bridge repairs with $277 million.

The pension issue has lingered in the background for so long that many people assume there is no reason to worry about it. Perhaps that assumption proves correct. But underfunded pension systems often appear manageable—until suddenly they aren’t.

That’s the danger with long term liabilities: problems can compound quietly for years before they collide with economic weakness, declining tax revenue, or rising borrowing costs.

At some point, a future Knoxville mayor will likely have to address this growing unfunded liability. And when that happens, will they blame their predecessors or the city’s wealthiest for not paying their fair share?

Or will they show true leadership, and solve the problem without casting blame or creating needless division?

David Moon is president of Moon Capital Management. A version of this piece originally appeared in the USA TODAY NETWORK.