The pension benefits that U.S. cities and counties are unable to cover could total as much as $574 billion, according to a study released on Tuesday.
The study, conducted by academics at Northwestern University and the University of Rochester, looked at how long the assets for 77 defined pension plans sponsored by 50 major U.S. cities and counties will last.
It found that six major cities — Philadelphia, Boston, Chicago, Cincinnati, Jacksonville and St. Paul — can only cover promised benefits through 2020.
“The fact that there is such a large burden of public employee pensions concentrated in urban metropolitan areas threatens the long-run economic viability of these cities, as residents can potentially move elsewhere to escape the situation,” said Joshua Rauh, at Northwestern’s Kellogg School of Management.
Rauh has warned previously that states are not forecasting their unfunded pension liabilities accurately and that their pension plans have a gap of $3 trillion.
With municipal plans also short billions of dollars, taxpayers will face a double burden, he said.
The study, which he completed with Rochester’s Robert Novy-Marx, found that if Chicago spent all of its tax revenue solely on its pension promises, it would take about eight years to cover those agreements it has already made.
In April, Chicago said it would need $660 million a year for 50 years to fix its current pension problems.
Can someone who is an expert weigh in on whether cities can now scale back these pensions? I’m not talking about the average worker here, but the top heavy management that gets all the sweetheart deals or the double dipping politicians that are getting more than one? Can’t we at least reassess what people get moving forward–there’s no way anyone can afford to give out all these pensions.
Taxpayers may be liable for whatever is currently vested in public employees pensions, but there’s no reason all public employees could not be switched to defined-contribution plans as soon as their union contracts expire.
It’s not as if there aren’t plenty of citizens who’d be happy to take these jobs without the defined-benefit pension. And, it’s way past time for states and cities to get out of the pension business.
Lets just say I am a public employee, who chose the benefits over the pay. We are engineers and our private sector employees alway were paid at least 20% more than we were. Over the years we would hear,”Why are you working there when you can be making this here”. All of a sudden the market tanks, the 401’s take a bath, and now everyone wants to attack our pension, the one we pay for, and that one that the legislators borrow from and never replace. I am sorry folks, we took these low paying jobs for the benefits and not the pay….why take it out on us….get a life….
@ amy. why the class warfare. the higher level people dont deserve it ? it’s always the lowly employee that deserves it. what a joke, most high level employees work their way up from those lowly positions to earn what they get. a pension is partly taken out of employee checks, so it is their money. not the state’s, or city’s to take back. i agree some of these shady union deals should be stopped. but just stop with the class warfare
But why should people collect more in their pensions than they ever earned when actually doing the work? If it were up to me, pensions would top out at a multiple of the median income of the city/state. We can’t afford to pay people to do the work – it is wrong to pay six figures to those who used to do it.
Except that your pension is a joke to skim money off the tax payer. You contribute only 6 or 8 cents for every dollar you take out after you retire. The two nicest homes on my block are paid for by retired city workers with fat pensions.
get rid of all city workers that are not essential,police and fire keep everyone else including aldermen down size.
Steven Marx(ism) — It’s people like you that are a major part of the problem. As Ron Tough correctly pointed out, you barely pay 1/10 of the costs to fund your pension. The deficit #’s above don’t lie, that why the private sector got rid of pensions decades ago. Why should taxpayers be on the hook for bloated pensions to government workers that barely work 40 hrs/week?
The country is broke there is no money to pay you, for FY 2010 the US budget was nearly 3.5T, revenue was 2.3 requiring borrowing 1.3T! there is no money other then what they print!
We in the private sector have been ruined by the crash. Why is it then necessary for you in the bloated public-sector to feel that you are owed anything? Let me tell you something you are no better then the rest us and I would suggest that all state employees begin to understand that the US is in very dire straits as the result the demands of government employees. These demands have bankrupted the private sector and now the chickens have truly come home to roost.
Federal employees earn higher average salaries than private-sector workers in more than eight out of 10 occupations, a USA TODAY analysis of federal data finds.
Accountants, nurses, chemists, surveyors, cooks, clerks and janitors are among the wide range of jobs that get paid more on average in the federal government than in the private sector.
Overall, federal workers earned an average salary of $67,691 in 2008 for occupations that exist both in government and the private sector, according to Bureau of Labor Statistics data. The average pay for the same mix of jobs in the private sector was $60,046 in 2008, the most recent data available.
These salary figures do not include the value of health, pension and other benefits, which averaged $40,785 per federal employee in 2008 vs. $9,882 per private worker, according to the Bureau of Economic Analysis.
http://www.usatoday.com/news/nation/2010-03-04-federal-pay_N.htm
Biff:
I’ve been employed full time every year since 1968. I started out in the private sector, but took a job in government so I could serve my community. I work hard, as does almost every other government worker. It’s like any other workplace; most people are good, honest workers, but there are a few slackers, and fewer criminals. Unfortunately the press has led you to believe we’re all lazy and worthless, while we bust our butts providing services citizens like you demand with ever diminishing resources to do our jobs. And yes, I went back to the private sector for 9 years, but the politics, corruption and greed were so much greater there that I went back to local government where I could do work that benefits my community. When I did that I took a 20% pay cut, but I was promised a pension. Now I work 50-60 hours per week due to staffing cuts. I’m salaried; I don’t get overtime. I don’t make 6-figures even though I’m an experienced manager. I won’t get a huge pension under IMRF, but since my wife and I planned for our retirement by saving and investing a little each month, I may not have to work another full-time job when I retire. Bottom line? Stop demonizing all government employees. Those of us in the trenches provide a good day’s work for our pay. The vast majority of us are honest and we truly care about our communities. We earn our pay. It’s not a gift. Don’t let the media paint all of us as lazy and corrupt because that’s simply not the truth.
Biff:
I’ve been employed full time every year since 1968. I started out in the private sector, but took a job in government so I could serve my community. I work hard, as does almost every other government worker. It’s like any other workplace; most people are good, honest workers, but there are a few slackers, and fewer criminals. Unfortunately the press has led you to believe we’re all lazy and worthless, while we bust our butts providing services citizens like you demand with ever diminishing resources to do our jobs. And yes, I went back to the private sector for 9 years, but the politics, corruption and greed were so much greater there that I went back to local government where I could do work that benefits my community. When I did that I took a 20% pay cut, but I was promised a pension. Now I work 50-60 hours per week due to staffing cuts. I’m salaried; I don’t get overtime. I don’t make 6-figures even though I’m an experienced manager. I won’t get a huge pension under IMRF, but since my wife and I planned for our retirement by saving and investing a little each month, I may not have to work another full-time job when I retire. Bottom line? Stop demonizing all government employees. Those of us in the trenches provide a good day’s work for our pay. The vast majority of us are honest and we truly care about our communities. We earn our pay. It’s not a gift. Don’t let the media paint all of us as lazy and corrupt because that’s simply not the truth.
Hey Steven Marx, didn’t you hear that the public sector now earns more on average than the private sector? And we have to pay for your retirement. I like how all of you guys give each other huge raises near the end of your career so you can pad your pensions….fricken thiefs!
Nobody is demonizing all government employees. It’s a fair to question why many teachers, administrators and other public employees retiring in their mid-50’s make more money in retirement than they do while working. http://www.familytaxpayers.org/
Biff – I completely agree with you – Steven – my guess is that you really took the position because you wanted the guarantee of a job that you couldn’t get in the private sector. – pensions are out of control. I will be one of those leaving this city/state if they start trying to go after taxpayers for the money.
I own a business and am responsible for putting my own money away – the rest of us don’t have the government safety net and I’m not going to pay for theirs and mine!
“the US is in very dire straits as the result the demands of government employees”
How about because of the trillions of dollars funding an unjust war?? And bailing out Wall Street? etc, etc
Funny, I know a lot of private sector people who have pensions. My wife was interviewed just last year for 2 positions that came with pension plans. It is a myth that the private sector doesn’t have pensions. Public pensions are broke because public agencies haven’t been paying their agreed share for decades, not because they are too generous. The money was instead lavished on the voters to buy their votes. I heard a farmer wailing about rich public employees. Problem is he is a public employee too, my little hobby farms brings with it a ridiculous amount of government “ag support” money. The guy makes as much as a half dozen government employees just for being a farmer on top of the money he makes selling his produce. He has no livestock so he basically works 3 months out of the year and wails about “lazy” government workers. Give me a break.
“Hey Steven Marx, didn’t you hear that the public sector now earns more on average than the private sector?”
This was recently proven a myth. The average age and years of service for public sector employees is much higher than that of the private sector. Public employee payrolls have dropped greatly over the years, leaving an older, higher paid staff. When this is accounted for private sector employees still make more. Also, not too many retail workers on government payrolls bringing down the average. Nice try….