曼哈頓政策研究所-大城市養(yǎng)老金與城市末日循環(huán)（英）

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April2023

ManhattanInstitute

AboutUS

Report

BigCityPensionsandtheUrbanDoomLoop

DanielDiSalvo

seniorfellow

ManhattanInstitute

JordanMcGillis

Paulsonpolicyanalyst

TheManhattan

Instituteisathinktankwhosemissionistodevelopanddisseminatenewideasthatfostergreatereconomicchoiceandindividualresponsibility.

ExecutiveSummary

ManyAmericancitiesareinaquandary.Fordecades,theyhavepromisedgenerouspensionstopoliceofficers,firefighters,andcivilservants,whohelpedmakethemsuccessful.Butnow,thedeferredcostsofthismodelaresqueezingcurrentservices.

Thecombinedeffectofpreexistingpensioncosts,theendofabullmarket,andtheCovid-inducedexodusofofficeworkersandaffluentresidentsisthatcitiesarewatchingtheirrevenuestopoutwhiletheyowebillionsofdollarstoretiredandsoon-to-retirecityemployees.

Citieshavefrequentlyrespondedtobalance-sheetstrainbycuttingservices—especiallypolicing,thusreducingurbanqualityoflife.Taxincreasesareanotherpossibleresponse,buttheyalsodriveurbanexodus.Aone-twopunchofhighertaxesanddiminishedservicesthreatenstopushcitiesintoanurbandoomloop:affluentresidentsandbusinessesfleecities,which,inturn,reducestaxrevenuesandservices,leadingtoevenmoreoutmigration.AsAmericancitieslookbeyondthepandemicshock,theyfacethedualchallengeofcoveringpensionobligationstoformerworkerswhileupholdingserviceresponsibilitiestocurrentinhabitantsontighterbudgets.

ThispaperexaminestherevenueandpensionspendingnexusesofAmerica’s10largestcitiesbypopulation(NewYork,LosAngeles,Chicago,Houston,Phoenix,Philadelphia,SanAntonio,SanDiego,Dallas,andSanJose)asweenterthepost-pandemicera.

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Contacts

BigCityPensionsandtheUrbanDoomLoop

Thekeyfindingsare:

?Pensionspendingincreasedinallofthe10largestAmericancitiesoverthelastdecade,withafewcitiesexperiencingadoublingoreventriplingoftheirexpendituresin2021dollars.

?Almostallcitiessawanincreaseinpensionspendingperemployee.

?ThereislargevariationintheamountperemployeethatAmericancitiesarespendingonpensions.

?Torespondtorisingpensiondemands,somecitieshavereducedemployment,oftenintheareaofpublicsafety.

?Aworseningmarketenvironmentforpensionfundswillnecessitateincreasedpensionexpendituresbycitiesin2023andbeyond,exacerbatingpressurestolimitorreduceemploymentand,thus,cityservices.

Toavoidtheviciouscycleofdeterioratingurbanconditionsspurringmoreoutmigration,citiesneedtoconsiderahostofpolicyoptions.Werecommendthefollowing:

1.Petitionstategovernmentstochangepensionstatutestoallowfordefined-contributionoptionsfornewhires.

2.Alterexistingpensionformulasfornewhirestorequiremoreyearsbeforeafullpensioncanbeearned.

3.Identifywaystoimproveserviceefficiencywithoutinvestingingreaterhumancapital.

TorequestaninformationpacketaboutMI,orifyouhavequestionsabouthowtosupportus,contactsupport@manhattan-.

52VanderbiltAve.NewYork,NY10017

(212)599-7000info@manhattan-

Introduction

TheCovid-19pandemicinducedgreatfinancialinstabilityforAmerica’sbigcities.Pensionfinancing,whichconstitutesasubstantialsliceofmunicipalexpenditures,roseandfell,aswell.Abullmarketin2021wasfollowedbyamarketcollapsein2022,wipingoutthegainsmadebystateandlocalpensionfundsoverthepreviousdecade.

Pensionfundsareheavilydependentontheirinvestmentportfolios.Whenthestockmarkethitnewhighsinthefallof2021,theaveragefundinglevel—assetsasashareofliabilities—ofstateandlocalpensionsroseto85%,thehighestpointinthelast15years,whichreducedunfundedliabilities.

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Butthehighquicklyworeoff.Themarketdeclineof2022pushedfundinglevelsdownroughly15%,andunfundedliabilitieshaveincreased.Fundingratioshaveslumpedtowheretheywereadecadeago.

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In2023,stateandlocalgovernmentswillhavetocontributemoretothesepensionplanstocompensateforthemarketshortfalls,

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whichwillfurtherstraincitybudgets.

Theriseofwork-from-homehasalsoledsomebusinessesandresidentstoleaveAmericancities,whichpresentsrealriskstocities’publicfinances.Thevalueofcommercialrealestatehasfallen,whichwilllikelyreduceimportantcommercialproperty-taxrevenues.

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Furthermore,fewerridersonpublictransportationmeanthatlocalgovernmentsmustcoverthecostsofdecreasedfarerevenues,asthecostsofsubwayandbussystemsarelargelyfixed.

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BigCityPensionsandtheUrbanDoomLoop

Whileeconomictheorywouldpredictthatlowerpriceswillattractnewentrantstopickupthemarketslack,urbantheoristsworrythatthistimewillbedifferent.Witharedistributionofeconomicactivityoutofurbancores,manydowntownareasfacewhatArpitGupta,professoroffinanceatNewYorkUniversity,callsanurban“doomloop.”

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Inthisscenario,reducedeconomicactivityandlowerdaytimepopulationsdowntowninviteincreasesinantisocialbehavior,preventingthereboundsthathavegenerallyfollowedpastdownturns.Continualunderperformanceofcommercialrealestateleadstolowertaxrevenuesandprecipitatesservicecuts,pushingcitiesfurtherdownthenegativespiral.

Torespondtothesechallenges,citygovernmentshavelimitedoptions.Inthelongterm,somecitiesmightalterzoningandland-usepoliciestopermittherepurposingofcommercialstructuresthatareinlessdemandduetotheincreaseinwork-from-home.Intheshortrun,however,givenbalancedbudgetrequirements,citygovernmentsmusteitherraisenewtaxrevenueorcutpublicspending.Raisingnewrevenueispoliticallyunpopularandbadforthebusinessclimate.Cuttingspendingthreatensqualityoflife,insofarascitygovernmentsareunabletoprovidesufficientpublicgoodssuchastransit,schools,policing,andsanitation.Ifaffluent,mobileresidentscontinuetoleavecities—assomeanalystsworrythattheywill—theresultmaybeapatternwherebybudgetcutspromotemoreoutmigration,whichpromotesfurtherbudgetcutsandmoreoutmigrationand,ultimately,urbandecay.

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Inthispaper,wetrackedbig-citygovernmentpensionexpenditurespriorto,during,andaftertheCovid-19pandemicbygatheringdatafromcities’AnnualComprehensiveFinancialReports(ACFRs).

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WefocusonAmerica’s10largestcitiesbypopulationbecausepopulationisaroughproxyforthesignificanceofametroarea.Infact,thesecitiescombinedaccountfornearly8%ofthetotalU.S.population—and,ofcourse,thesecitiesandtheirmetroareastogetheraccountforamuchlargershare.Thetrajectoryofthesecitiesisclearlyofnationalconcern.

Byfocusingonthebigcities,weholdinabeyancethedebateoverwhetherlocalpublicpensionsystemsingeneralareincrisisorwhetherthecrisisisconfinedtoafewmunicipalities.

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Ourdataprovideaglimpseintohowthesecities’pensionexpenditureshavechangedoverthelastdecade,includinginthetumultuouspandemicperiod.Byconnectingtheselocalpensionexpenditurefigurestocitygovernmentbudgetnumbers,weexplorewhethergrowingpensionexpendituresareassociatedwithemploymentreductions.

Notethatcityofficialshavelimitedcontroloftheirpensionexpendituresandusuallycannoteasilyreducespendingonpensions,thecostsofwhicharelargelyfixed.

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Therefore,citieshaveonlythreepotentialresponsestorisingpensioncosts:theycanincreaserevenues,reduceexpendituresonotheritems,orreduceemployment.Thelastoptionisoftenthemosteffectivebecausecitygovernmentsarehighlyhuman-capitalintensive,andalargeportionofcitybudgetsisallocatedtoemployeecompensation.

Wefindthatbetween2011and2021,pensionexpendituresincreased(ininflation-adjusteddollars)inallofthe10largestAmericancities.Insomecases,theincreaseswereverylarge.Buteachcityrespondedsomewhatdifferentlytoincreasedcosts.Somecutemployment,especiallyintheareaofpublicsafety.

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Othersadoptedquestionablenewfinancingmechanismsoreconomicgrowthstrategies.

Ultimately,ifacityseekstoaddressthepensioncrunchbykeepingtheemployeeheadcountdown—oftenbyleavingvacanciesunfilled—itmustalsoimproveproductivity,orpublicserviceswilldeteriorate.Thisisamajorfactorinavoidingtheurbandoomloop.

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BigCityPensionsandtheUrbanDoomLoop

Background

Defined-benefitpensionsoperateasfollows:workersandtheiremployerseachmakecontributionstoafund(althoughsometimesinthepublicsector,theemployee’sshareispaidbytheemployer),whichisgovernedbyapoliticallyappointedboardthatmakesbroadinvestmentdecisionsabouthowtoallocatethemoney.Thefundisthenusedtopayanannuity-likestreamofincometoworkerswhentheyretire.The“definedbenefit”meansthatacertainpercentageofaworker’sfinalaveragesalary—determinedbyaformulathattakesintoaccountthenumberofyearsonthejobandaveragesalaryoverthelastthreetofiveyearsofemployment—ispaidfortheremainderoftheretiredworker’slife.

Thebasicstructureofpublicpensionplansraisesaproblem.Byprovidingaguaranteedstreamofincomeinretirement—regardlessofwhetherthepensionfund’sassetsandmarketperformancearesufficienttomakethosepayouts—suchplansexposetaxpayerstoconsiderablerisk.Iftheplansareunderfunded,publicbudgets,andultimatelytaxpayers,mustcomeupwiththemoneytomakethecontractuallyguaranteedpayouts.

Moststateandsomelocalemployeesareenrolledinhugestate-runpensionplans,butmanybig-citygovernmentsoperatetheirownplans.Collectively,inour10municipalities,thereare21distinctplans.Inoursample,onlySanAntoniocontributestoalargestate-runplan(Table1).

Table1

NewYorkCity

Phoenix

NewYorkEmployees’RetirementSystem(NYCERS)

CityofPhoenixEmployees’RetirementSystem

NewYorkCityBoardofEducationRetirementSystem(BERS)

NewYorkCityFirePensionsFund(NYCFPF)

Philadelphia

NewYorkCityPolicePensionFund(NYCPPF)

PhiladelphiaPublicEmployeesRetirementSystem

NewYorkCityTeachers’RetirementSystem(TRS)

SanDiego

Chicago

SanDiegoCityEmployees’RetirementSystem

MunicipalEmployees’Annuity&BenefitFundofChicago(MEABF)

Laborers’&RetirementBoardEmployees’

Annuity&BenefitFund(LABF)

Dallas

Policemen’sAnnuity&BenefitFund

EmployeesRetirementFund(ERF)

Firemen’sAnnuity&BenefitFund

DallasPoliceandFirePensionSystem(DPFP)

LosAngeles

SanJose

LosAngelesCityEmployees’RetirementSystem(LACERS)

FederatedCityEmployees’RetirementSystem

LosAngelesFireandPolicePensions(LAFPP)

PoliceandFireDepartmentRetirementPlan

Houston

HoustonMunicipalEmployeesPensionSystem

HoustonFirefighters’ReliefandRetirementFund

HoustonPoliceOfficers’PensionSystem

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BigCityPensionsandtheUrbanDoomLoop

Today,some456,729peopleworkforthe10citygovernmentsstudiedhere,almostallofwhomareeligibleforatraditionaldefined-benefitpension.Theproblemisthatsomeofthesecitygovernmentshavenotsetasideenoughmoneytopayforallthebenefitsthattheyhavepromisedtocurrentandformerworkers.Anotherissueisthatsomeoftheseplansareverycostly,evenifthecityhasbeenprudentinsettingmoneyasidetopayforthem.

Thebestavailabledataonacity’spensioncontributionsareinitsACFRs.Bylookingatpensionexpendituresinisolation,wefocusonwhatpensionsarecostingacityeachyear.Foreachcityandeachyear,wealsocalculatetotalpensionexpendituresasapercentageofgeneralrevenue,whichshowshowmuchofallcityrevenueisallocatedtopensions,andtotalpensionexpendituresperfull-timeemployee(FTE).Thelatterisausefulmeasureofpension-inducedfiscalpressurebecauseacity’spensioncontributionsare,inpart,aresultofthesizeofitsworkforce.Ifacityhiresmoreworkers,itspensioncontributionswillincreasebecauseitmustcontributeonbehalfofmorepeople.Therefore,hiringmoreworkerscreatesgreaterlong-runliabilities,addingtothecostperworker.Finally,wecalculatethepercentagechangeintotalcityemploymentfrom2011to2021.Thesefiguresformthebasisofouranalysis.

CityTrends

ThefirstthingtoconsiderwhenthinkingaboutthetrajectoryofAmerica’sbiggestcitiesistheirpopulationtrends.Citiesthataregrowingrapidlywillneedtoincreasethesizeoftheirpublicworkforcestoprovidesufficientservicestoincomingresidents.Thosewithslowgrowth(ordecline)needtoconsiderwaystotrimtheirnumberofpublicworkerstocorrespondtoasmallertaxbase.InTable2,wedisplaythepopulationtrendsoverroughlythelastdecadeforthe10citiesexaminedhere.

Table2

CityPopulationTrends

IncreaseYears

NewYorkCity

0.40%

2011–2019

LosAngeles

4.19%

2012–2021

Chicago

1.88%

2012–2021

Houston

7.97%

2012–2021

Phoenix

12.75%

2012–2021

Philadelphia

2.59%

2012–2020

SanAntonio

17.25%

2011–2020

SanDiego

6.79%

2011–2020

Dallas

8.03%

2012–2021

SanJose

9.38%

2011–2020

LookingacrossallofAmerica’sbiggestcitiesoveradecade(2011–21),thedatawegatheredprovidesiximportantlessons.

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BigCityPensionsandtheUrbanDoomLoop

1.PensionSpendingIncreasedEverywhere

Pensionspendinghasincreasedinall10cities.Somecitiessawhugeincreases,suchasChicago(175%),Phoenix(202%),andSanJose(116%).Otherssawquitelargeincreases,suchasDallas(42%)andHouston(44%).Meanwhile,NewYork(15%),Philadelphia(16%),SanAntonio(17%),andSanDiego(20%)managedtokeeptheexpenditureincreasesdown,bycomparison(Table3).

Table3

PercentageChangeinPensionExpenditures,2011–21

NewYork15%

LosAngeles*

16%

Chicago

175%

Houston

44%

Phoenix

202%

Philadelphia

16%

SanAntonio

17%

SanDiego

20%

Dallas

42%

SanJose

116%

*Since2013

2.MostCitiesIncreasedSpendingperEmployee

Mostofthecitiesstudiedheresubstantiallyincreasedtheirpensionspendingrelativetothenumberofpeopletheyemploy,akeyindicatorofspendingvs.services.Insomecities,suchasPhoenix(218%),Chicago(188%),andSanJose(102%),theincreaseswerehuge.Inothers,suchasSanDiego(0.1%),NewYork(6%),andSanAntonio(7%),theyweremodest(Table4).

Table4

PercentageChangeinPensionExpenditureperFTE,2011–21

NewYork6%

LosAngeles*

13.90%

Chicago

188%

Houston

50%

Phoenix

218%

Philadelphia

15%

SanAntonio

7%

SanDiego

0.10%

Dallas

26%

SanJose

102%

*Since2013

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BigCityPensionsandtheUrbanDoomLoop

3.InAbsoluteTerms,PensionSpendingperEmployeeVariesGreatly

Thoughincreaseswereseenacrosstheboard,thereislargevariationintheabsoluteamountperFTEthatAmerica’sbigcitiesspendonpensions(Table5).LeadingthepackisSanJose,atalmost$58,000,whileDallas,Houston,andSanAntonioallspentunder$20,000in2021.

Table5

PensionExpenditureperFTE,2018–21

2018201920202021

NewYorkCity$31,884$32,714$32,191$32,063

LosAngeles$41,405$42,187$44,074$47,266

Chicago$31,995$31,417$44,911$45,206

Houston$61,668$18,630$18,639$18,931

Phoenix$33,652$30,552$33,581$49,466

Philadelphia$30,271$29,727$30,467$28,263

SanAntonio$15,075$16,224$18,426$17,184

SanDiego$35,914$36,670$32,740$35,003

Dallas$17,152$17,331$17,346$17,640

SanJose$49,457$52,378$55,933$57,685

4.ThankstoFederalGrants,RevenuesAreKeepingPacewithExpenditures(forNow)

Ingeneral,cities’totalrevenueshavetrackedpensionspendinggrowth(Table6),butthatincludesgrantsfromthefederalgovernment(forCovidresponse)thatarenotexpected—letaloneguaranteed—inthefuture.Withoutthegrants,cityspendingonpensionswouldeatupagreaterportionoftheirrevenues.However,oneofthecities,Houston,isalsosomethingofananomaly,asithadtobailoutitspoliceandfirefighterfundsin2018andthusmadeaverylargeexpenditurethatyear.

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Therefore,lookingoverashorterorlongerperiod,Houstonwouldlikelyshowevidenceofincreasingpensionexpendituresasapercentageofcityrevenue.

Table6

PercentageofCityRevenuesSpentonPensions,2018–21

2018201920202021

NewYorkCity

11%

11%

10%

9%

LosAngeles

8%

8%

9%

8%

Chicago

1%

1%

15%

12%

Houston

27%

8%

7%

7%

Phoenix

11%

1%

1%

13%

Philadelphia

8%

9%

9%

8%

SanAntonio

7%

7%

8%

7%

SanDiego

13%

12%

11%

11%

Dallas

7%

7%

7%

7%

SanJose17%16%15%16%

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BigCityPensionsandtheUrbanDoomLoop

5.SomeCitiesAreCuttingEmployment

Chicago(–5%),Houston(–4%),andPhoenix(–5%)allhadfewerFTEsin2021thantheydidadecadeearlier.Meanwhile,PhiladelphiaandLosAngelesheldemploymentroughlyconstantovertheperiod(Table7).Othercities,includingSanDiego(12%),SanAntonio(10%),andNewYork(9%),increasedemployment,withmostoftheincreaseinthosecitiescomingintheearlierpartofthedecadeandthenremainingstable,ordecliningslightly,inthelastfouryears(Table8).Someoftheseincreasescouldclearlybeinterpretedasaresponsetourbangrowth—asbothSanAntonioandSanDiegosawsignificantpopulationincreasesoverthedecade.NYC’spopulation,ontheotherhand,didnotgrowovertheperiod.WiththeexceptionofNYC,thecitiesthatwereabletoholdemploymentconstanthadalowerpensioncostperFTE,andthetwocitiesthatincreasedemploymentthemosthadthelowestpension-spending-to-FTEratio.

Table7

PercentageChangeinCityFTEs,2011–21

2011–2021

NewYork

9%

LosAngeles*

2.50%

Chicago

–5%

Houston

–4%

Phoenix

–5%

Philadelphia

0.90%

SanAntonio

10%

SanDiego

12%

Dallas

6%

SanJose

7%

*Since2013

Table8

TotalCityFTEs,2018–21

2018201920202021

NewYorkCity

298,370

300,442

300,446

291,101

LosAngeles

32,535

33,059

33,973

31,369

Chicago

36,231

36,577

36,616

34,767

Houston

22,568

21,932

21,962

21,835

Phoenix

12,686

12,843

12,900

12,742

Philadelphia

24,520

25,315

24,929

23,657

SanAntonio

11,099

11,379

11,154

11,042

SanDiego

11,593

11,598

11,598

11,295

Dallas

12,518

12,747

13,000

13,000

SanJose7,5277,7287,5757,627

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BigCityPensionsandtheUrbanDoomLoop

6.EmploymentCutsTendtoFallonPoliceDepartments

While“defundthepolice”becamearallyingcryonlyin2020,citypensionproblemshadalreadypromptedsomebigcitiestoreducethesizeoftheirpoliceforces.

Takentogether,ourdatasuggestthatAmerica’sbiggestandmostdynamiccitiesarenotkeepingupwithrisingpensioncosts.Thatis,theyarespendingmoreinthehereandnowbutarenotprovidingcitizenswithanymoreservices,especiallypublicsafety.

ACloserLook

Thestructureofdefined-benefitpensionplanscreatestwodistinctproblemsforAmerica’sbigcities.Thefirstisthat,insomecities,pensionsmaybemoregenerousthannecessarytoattractatalentedandableworkforce;thesecitieswouldbebetteroffwithsmallerpensionsbuthighersalariestoattractworkers.Thesecondproblemisthatinmanycities,pensionsarebadlyunderfunded.Thissectionexaminesthesetwoproblemsinthe10largestU.S.citiesbypopulation.

NewYorkCity

NewYorkCity’spensionsarerelativelywellfunded,thankstoacourtdecisiondecadesago.Butthecity’spensionsarealsogenerous,socostsarehigh.

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Moreover,thecitywentonamajorhiringspreeunderMayorBilldeBlasio.

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Lookingatthe10-yeartrend,thetotalnumberofFTEsforNYCrosefrom267,423in2011to291,101in2021,despitepopulationremainingroughlyflatduringtheperiod.

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Interestingly,thecityhadnearlythesamenumberofuniformedpoliceofficersin2021asitdidin2011,whileimportantcategoriesofcrimeincreased.

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Meanwhile,thenumberofschoolteachersincreasedfrom107,625to119,210,evenasenrollmentinthepublicschoolsdeclined.

Thoughthecity’spensionsarereasonablywellfunded,theydependnotjustuponinvestmentearningsbutthecity’sincomeandproperty-taxrevenuesaswell.The2022stock-marketdeclinewasparticularlybrutalforthecity’spensionfunds,whichlost8.6%oftheirvalue.

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Asaresult,ratherthanreducingpensioncontributions,from$9.6billionin2022to$6.9billionin2026,asMayorEricAdams’searlybudgetproposes,thecitymayneedtostartcontributinganadditional$4billionbetween2024and2026.

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Thefirstproblem—excessivelygenerousbenefits—couldbesaidtoexistinNYC.Thecitycurrentlyhasalargenumberofjobvacanciesinkeyagenciesbutisstrugglingtoattracttalentedemployees.

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Itcannotconsiderbettercompensationbecausepensionobligationsareincreasing.Soitisstucktryingtofindotherwaystoimproveitshumancapital.

NYChasturnedtoanovelrevenuetactictoboosteconomicactivityandtaxreceipts:casinosandmarijuanasales.

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Thisstrategyishighlyquestionableinsofarasboththeseindustriesthreatentocorrodequalityoflifewithoutprovidingacorrespondingboostineconomicgrowth.Relyingonthesesourcesofrevenuesuggeststhatthecitycannolongermeetitscommitmentsthroughtraditionalmeansofeconomicgrowthandtaxationofthatgrowth.

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BigCityPensionsandtheUrbanDoomLoop

LosAngeles

LosAngeles,wheretotalcityemploymentfellby1,166between2018and2021,exemplifiesthecityservice-reductionproblem.Themajorityofthecity’semploymentdropwasamongthepoliceforce.LosAngeles,whichhad10,000officersinthemid-2010s,nowhasabout9,200,withanother600expectedtoleavetheforceinthenextyear.Asastopgapmeasure,L.A.willnowpayretiredofficerswhoarereceivingpensionstorejoinLAPD,allowingthemtodouble-dip.

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Chicago

InChicago,totalcityemploymentdeclinedslightly,from36,231in2018to34,767in2021.Thebiggestdropcameinthepoliceforce,whichlost1,515employeesoverthatperiod.Thisisespeciallyrelevantinacitythatsufferedabrutalcrimewaveoverthisperiod.

Thesecondproblem—pensionsbeingunderfunded—isclearlymanifestinChicago,whichhaspensiondebtgreaterthan45states.

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Thefundingratiosforitspolice,firefighter,laborer,andmunicipalemployeepensionsystemsareallinthelow30%range.

LikeNewYork,Chicagohasemployedquestionablemethodstoboostrevenue.Forinstance,theWindyCityapprovedanewcasinoinMay2022andplanstouse9%ofitsrevenuetodefraythecity’spensioncontribution.Thisisariskyandmorallydubiousstrategybecausecasinos,likestate-runlotteries,areequivalenttotaxesonlower-incomeAmericans.

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Otherproposalstoeffectivelytaxresidents(especiallythoseinlower-incomesectionsofthecity),suchasspeedcameraticketrevenue,

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showthatthecityofChicagoisnotonlyfailingtoprovideadequateservicesbutissearchingfornewwaystotaxitsleastfortunateresidentstopaythepensiontab.

Houston

Houston,America’sfourth-largestcityandthelargestinTexas,hasanoteworthyrecentpensionpastthatpredatesthepandemic.In2016,duringMayorSylvesterTurner’sfirstterminoffice,cityvotersandthestatelegislatureapprovedlandmarkpensionreformtogetthecitybackontofirmgroundandtoreduceyearlyspending.

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ThereformpackagereducedHouston’sunfundedliabilityfromover$8billionatitspassageto$1.5billionbytheendof2021.Inouranalysisperiod,theTurnerreformsshowthemselvesintheextraordinaryspendingthatthecityplungedintoitspensionsin2018.Thatyear,thecityspentmorethan27%ofitsrevenueonpensions,about$61,000perFTE.Inthethreerecordedyearssince,Houstonhasspent7.5%orlessofitsrevenueonpensions,under$19,000perFTE.Houston’snumberoffull-time-equivalentemployeeshasheldrelativelysteady,losingonly750employeesbetween2018and2021.Overall,thenumberofFTEsinHoustonwasthesamein2021asithadbeenin2012.

Phoenix

Phoenix,America’sfifth-largestcity,showsthattheemergingcitiesoftheSunBeltarenotimmunetothetravailsthatplagueoldercities.AstheReasonFoundationhasdocumented,Phoenixfindsitself“awash”inunfundedliabilities,whichin2021eclipsed$5billion.

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Thisdebthasmounteddespitethecityraisingitspensionspendingsubstantiallyoverthepastd