Tags: public | employees | pensions | insufficient | cities | counties | states

WSJ Op-ed: Mounting State/Local Pension Costs Spur Tax Pressure

By    |   Tuesday, 13 Jan 2015 07:14 PM

Decades of rising retirement benefits for workers —  frequently awarded by politicians who failed to set aside sufficient funds —  have created a worsening financial picture for many state and local governments, according to the Manhattan Institute's Steve Malanga.

The problems, which had been building for years, were exacerbated by the 2008 U.S. financial meltdown, and have left American cities and states "with somewhere between $1.5 trillion and $4 trillion in retirement debt," Malanga writes in the Wall Street Journal.

Even with the stock market's rebound, the assets of America’s biggest government pension funds are just 1 percent above their peak in 2007, according to a recent study by Governing magazine. But when inflation is factored in, they remain below their 2007 level.

The situation in Illinois is bleak. In April, 24 Illinois mayors urged Springfield to reform police and fire pensions, which on average are 55 percent funded.

Last June, California Gov. Jerry Brown signed legislation that will require school districts to increase funding for teachers’ pensions from less than $1 billion during the current school year to $3.7 billion by 2021. With Calpers, the state's public employee pension fund, also demanding more money, additional pressure for tax increases is likely to increase.

California taxpayer advocate Joel Fox recently observed that no matter what local politicians tell voters, when you see tax increases, "think pensions." Even so, "the tab keeps growing, and now it is forcing taxes higher in many places," Malanga says.

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Decades of rising retirement benefits for workers - frequently awarded by politicians who failed to set aside sufficientfunds - have created a worsening financial picture for many state and local governments, according to the Manhattan Institute's Steve Malanga. The...
public, employees, pensions, insufficient, cities, counties, states
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2015-14-13
Tuesday, 13 Jan 2015 07:14 PM
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