A confidential JPMorgan report issued last year predicts that municipal bond defaults, tax hikes and spending cuts are looming when close to $4 trillion in unfunded pension liabilities at the state and local levels come due, New York Post columnist Charlie Gasparino reports.

While it's no secret local governments are carrying hefty debt burdens, many liabilities are off-balance-sheet items, which makes state finances appear to be in less dire straits than they really are, according to the JPMorgan report, issued a year ago.

"Nationwide, the actual size of unfunded public pension liabilities is four times larger than the $900-plus billion that officials are ’fessing up to. That’s right, the bank sees a $3.9 trillion hole; to plug that, states and cities will need large tax hikes, massive budget cuts or both," Gasparino writes.

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"Plus, public-sector unions will have to accept smaller retirement packages, and later retirement ages, to keep the pension systems going," Gasparino adds.

Cities and towns face bigger risks than do state governments, the report finds.

"States and cities with the biggest holes face possible insolvency and default, though the bank believes the risk of default 'is greater for municipalities than for states,'" Gasparino writes.

"Many of the places facing the biggest pension liabilities are right here in the Northeast, where big government rules and public unions are such a potent political force that officeholders dish out gold-plated benefits."

Don't expect tax hikes to work either, and shrewd investments won't pump in enough revenues to cover the shortfalls either.

Spending has been so rampant that only painful belt-tightening austerity measures will solve the problem.

"In New York, for example, JPMorgan said state officials would have to immediately cut spending by 12.3 percent or raise taxes on everyone by 7.4 percent. And they’d need to make these tax hikes and budget cuts permanent for the next two decades to fully fund public-employee pensions," Gasparino adds.

"New Jersey faces an even bigger hole. Even after [Governor Chris] Christie’s reforms, it would still have to cut spending 30.8 percent or raise taxes another 17.2 percent, keeping them in place for two decades, to solve the problem."

A JPMorgan spokesman declined to comment on the report when asked by Moneynews.

JPMorgan's report echoes a famous December 2010 call made by star Wall Street banking analyst Meredith Whitney, who predicted municipal defaults could reach into the hundreds of billions of dollars.

That hasn't happened, though Whitney has maintained that state and local finances are still under strain, adding that defaults haven't happened yet because of new laws requiring local governments to take more drastic fiscal measures to delay defaulting if not avoid it.

"You have Stockton (Calif.) that is on the brink of bankruptcy. You have five cities, including Detroit, which is on the brink of insolvency. It's fascinating, because there's been so much back-room political maneuvering to keep these cities from going bust," Whitney told CNBC in March, pointing out how California is trying to pass legislation to prevent municipalities from declaring bankruptcy.

"So there's been every effort on the part of the states to prevent this tidal wave of defaults, which is going to happen sooner or later. It's happening at an accelerating pace."

Taxes are rising, social services are being cut and fiscal shortfalls will keep widening.

"They're not called technical defaults. It took how long for Greece to become a technical default, so they're insolvent, they're not paying their bills," says the founder of the Meredith Whitney Advisory Group.

"You're either willing to see it or you'll shut your eyes, and if people want to tell me, 'Oh, I was wrong' because this hasn't played out, stay tuned."

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video