There’s a maxim that says all politics is local. And so it goes that concerns about public-sector pensions drill down to the local as well. From coast to coast, cities figure prominently in the debate over — and problems facing — public pensions.
The financial meltdowns that Detroit and Stockton, Calif. experienced received a great deal of attention, but they are by no means unique among U.S. communities in facing such circumstances. Wealth Daily, in its recent discussion of municipal bankruptcies, cited remarks by New York Federal Reserve President William Dudley at a conference concerning approaches financially strapped communities can take. What do you suppose Dudley cited as a particularly serious factor in the stresses they face? Underfunded pensions.
Let’s take a look at what’s happening concerning a sampling of communities across the country.
Pennsylvania State Auditor General Eugene DePasquale (D) issued a report in January that said that the unfunded liability of the Keystone State’s municipalities had collectively reached $7.7 billion by the end of 2012, reports the Washington Times. It also noted that he warned that some Pennsylvania municipalities could face bankruptcy due to unfunded pension liabilities, and their retirees’ benefits could be imperiled. Last December, the Erie Times News reported that some of the state’s largest cities had big pension problems: the plan of its 13th largest city, Wilkes Barre, was 67% funded; that of the 6th largest, Scranton, was at 23%; and the plan run by its largest — and the 5th largest city in the United States, Philadelphia — was at 47%.
According to the Washington Times, local government leaders in Pennsylvania are pushing the state legislature to allow them to change the retirement options they provide their employees to save money. State officials acknowledge that something needs to be done, too: DePasquale has suggested consolidating local pension plans into a single state system and Gov. Tom Wolf (D) has acknowledged that the matter is “huge.”
Still, officials in Harrisburg don’t radiate a sense of urgency. Wolf said his administration is looking for answers but has not set a timetable for recommendations on how to deal with the problems municipal pension plans face. The legislature is not currently considering any legislation that would alleviate the pressure, and the Washington Times says Wolf is not taking that tack either but may suggest a bond issue to help Pennsylvania municipalities refinance their debt.
Also in January, the Florida Department of Management Services had told 19 local pension plans—all of which are less than 50% funded — that they need to address their unfunded liabilities.
That wasn’t news to Jacksonville, the largest city in Florida and the entire Southeast, whose Police and Fire Pension Fund has a $1.6 billion unfunded liability. The city and the fund have been mired in controversy over how to handle the plan’s finances for at least two years now, and failed to agree on a measure the city council approved that would have reformed the city’s pension plan.
The Florida House on April 24 approved SB 172, one day after the Senate had done so. The measure is intended as a way to help address the challenges those communities face in funding their pension plans.
According to the Naples News, the bill would more tightly control how towns and cities in the Sunshine State could use funds from a state premium tax on casualty and property insurance — which are among the sources municipalities there use to fund their pension plans.
Everything’s big in Texas. Among the Texas cities facing pension challenges are Houston, San Antonio, Fort Worth and Galveston. That affects a large number of people — Houston is the nation’s 4th largest city, San Antonio the 7th, and Fort Worth the 17th; 25 states each have less people than the combined population of these four cities.
And as is its wont, Texas could be charting its own course. According to the San Antonio Business Journal, Rep. Jim Murphy and Sen. Paul Bettencourt, both Republicans representing Houston, have introduced in their respective chambers legislation that would enhance municipal control of pension funds — quite the opposite approach of some sister states. The Journal reports that the business community supports the measure since it sees it as a way to enhance economic development in Texas.
The bill would allow municipalities that sponsor pension plans that were created under state law but are not part of the state retirement system to adopt measures that supplement or even supersede the provisions of the measures that created their retirement plans. That includes provisions concerning benefits, participation and eligibility requirements, funding sources and amounts, and administration.
HB 2608, the House version, was referred to the House Pensions Committee on March 23. The committee held a public hearing on it on April 20.
The financial meltdowns that Detroit and Stockton, Calif. experienced received a great deal of attention, but they are by no means unique among U.S. communities in facing such circumstances. Wealth Daily, in its recent discussion of municipal bankruptcies, cited remarks by New York Federal Reserve President William Dudley at a conference concerning approaches financially strapped communities can take. What do you suppose Dudley cited as a particularly serious factor in the stresses they face? Underfunded pensions.
Let’s take a look at what’s happening concerning a sampling of communities across the country.
Pennsylvania State Auditor General Eugene DePasquale (D) issued a report in January that said that the unfunded liability of the Keystone State’s municipalities had collectively reached $7.7 billion by the end of 2012, reports the Washington Times. It also noted that he warned that some Pennsylvania municipalities could face bankruptcy due to unfunded pension liabilities, and their retirees’ benefits could be imperiled. Last December, the Erie Times News reported that some of the state’s largest cities had big pension problems: the plan of its 13th largest city, Wilkes Barre, was 67% funded; that of the 6th largest, Scranton, was at 23%; and the plan run by its largest — and the 5th largest city in the United States, Philadelphia — was at 47%.
According to the Washington Times, local government leaders in Pennsylvania are pushing the state legislature to allow them to change the retirement options they provide their employees to save money. State officials acknowledge that something needs to be done, too: DePasquale has suggested consolidating local pension plans into a single state system and Gov. Tom Wolf (D) has acknowledged that the matter is “huge.”
Still, officials in Harrisburg don’t radiate a sense of urgency. Wolf said his administration is looking for answers but has not set a timetable for recommendations on how to deal with the problems municipal pension plans face. The legislature is not currently considering any legislation that would alleviate the pressure, and the Washington Times says Wolf is not taking that tack either but may suggest a bond issue to help Pennsylvania municipalities refinance their debt.
Also in January, the Florida Department of Management Services had told 19 local pension plans—all of which are less than 50% funded — that they need to address their unfunded liabilities.
That wasn’t news to Jacksonville, the largest city in Florida and the entire Southeast, whose Police and Fire Pension Fund has a $1.6 billion unfunded liability. The city and the fund have been mired in controversy over how to handle the plan’s finances for at least two years now, and failed to agree on a measure the city council approved that would have reformed the city’s pension plan.
The Florida House on April 24 approved SB 172, one day after the Senate had done so. The measure is intended as a way to help address the challenges those communities face in funding their pension plans.
According to the Naples News, the bill would more tightly control how towns and cities in the Sunshine State could use funds from a state premium tax on casualty and property insurance — which are among the sources municipalities there use to fund their pension plans.
Everything’s big in Texas. Among the Texas cities facing pension challenges are Houston, San Antonio, Fort Worth and Galveston. That affects a large number of people — Houston is the nation’s 4th largest city, San Antonio the 7th, and Fort Worth the 17th; 25 states each have less people than the combined population of these four cities.
And as is its wont, Texas could be charting its own course. According to the San Antonio Business Journal, Rep. Jim Murphy and Sen. Paul Bettencourt, both Republicans representing Houston, have introduced in their respective chambers legislation that would enhance municipal control of pension funds — quite the opposite approach of some sister states. The Journal reports that the business community supports the measure since it sees it as a way to enhance economic development in Texas.
The bill would allow municipalities that sponsor pension plans that were created under state law but are not part of the state retirement system to adopt measures that supplement or even supersede the provisions of the measures that created their retirement plans. That includes provisions concerning benefits, participation and eligibility requirements, funding sources and amounts, and administration.
HB 2608, the House version, was referred to the House Pensions Committee on March 23. The committee held a public hearing on it on April 20.
More than the Sonoran Desert is hot in Arizona — so is public pension plan funding. In 2013, the 457 plan offered by Phoenix — the capital and 6th largest city in the United States — was $1.5 billion underfunded and 56% funded. But in November 2014, Phoenix voters resoundingly rejected a proposal to close the funding gap.
And Phoenix is not alone. In February, the Arizona Supreme Court held a measure that changed the permanent benefit increase in order to make the state’s Public Safety Personnel Retirement System (PSPRS) more financially stable. That, reports Verde Independent, has Arizona communities worried about having to help cover the PSPRS’ unfunded liability. For instance, Cottonwood, Ariz. — a community of only 11,000 — has a $9 million unfunded liability for its police and fire department pension plan.
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