Local government public pensions

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Public pensions

Pension health by state
Pension terms
Pensions on the ballot
State finances on the ballot
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Local government pensions are public pension systems that cover municipal and school district employees. Local governments also face pension problems. The pension crisis is "the largest single financial issue facing state and local governments," according to David Crane, former Gov. Arnold Schwarzenegger's special adviser for jobs and economic development.^[1]

A majority of states have relatively few locally-sponsored plans. Hawaii, Maine and Montana have none. A few states have more than 100 local plans. Illinois reported having 365 local plans, and Pennsylvania reported that it had 928, as of 2002.^[2]

One of every five dollars collected in local taxes is now going to pay benefits for government employees.^[3] Rising retiree costs are likely to have a large impact on local governments, which not only employ more workers than the state, but also dedicate most of their payrolls to police officers and firefighters, who enjoy the best benefits and earliest retirements.^[1]

Local pension crises[edit]

See also: Ten cities facing the worst of the pension crisis

A 2010 report by Northwestern University suggested that the previous estimates for unfunded pension liabilities were too low by billions of dollars. According to the report, the total unfunded liabilities for local pension plans was $574 billion dollars. This liability was in addition to the $3 trillion debt that was facing state-sponsored pension plans, though the report stated this $3 trillion was also a low estimate and that the actual unfunded liabilities for states was $5 trillion. According to projections by the report, over 25 municipalities would run out of assets by 2025.^[4]

2013 Pew report[edit]

Sixty-one key cities across America have emerged from the Great Recession with a gap of more than $217 billion between what they had promised their workers in pensions and retiree health care and what they had saved to pay that bill, according to a 2013 report by the Pew Charitable Trusts. The cities showed a $99 billion shortfall in pensions in 2009, the most recent year with complete data, with the rest of the $118 billion shortfall for retiree health care and other benefits.^[5]

According to the report, between 2007 and 2009, 16 cities consistently did well in funding their pensions, while nine cities underperformed. Milwaukee, Wisconsin had a surplus at the end of fiscal year 2009, with enough money to cover 113 percent of the city's liabilities. At the other end of the spectrum, pension systems in four cities—Charleston, West Virginia; Omaha, Nebraska; Portland, Oregon; and Providence, Rhode Island—were the most poorly funded, with Charleston trailing all the cities at 24 percent.^[6]

For pensions, the 16 best performing cities included in the Pew study were: Albuquerque, New Mexico; Baltimore, Maryland; Charlotte, North Carolina; Dallas, Texas; Denver, Colorado; Des Moines, Iowa; Los Angeles, California; Milwaukee, Wisconsin; Salt Lake City, Utah; San Antonio, Texas; San Francisco, California; Seattle, Washington; Sioux Falls, South Dakota; Virginia Beach, Virginia; Washington, D.C.; and Wichita, Kansas.^[7]

The nine worst performing cities included in the Pew study were: Charleston, West Virginia; Chicago, Illinois; Fargo, North Dakota; Jackson, Mississippi; Little Rock, Arkansas; New Orleans, Louisiana; Omaha, Nebraska; Philadelphia, Pennsylvania; and Portland, Oregon.^[8]

Reforms[edit]

The city of Oakland, California asked police officers in 2010 to contribute 9% of their salaries toward their pensions and to agree to a later retirement age for new hires. When the union did not agree unless the city gave it a three-year,no-layoff pledge in return, city officials laid off 80 of the city's police officers. The cuts amounted to one-tenth of the force.^[1]

State support for local government pensions[edit]

State government financial subsidies for local government plans^[2]

State	Teachers' plans - Do state governments provide any financial support for plans sponsored by local governments?	Public safety officers - Do state governments provide any financial support for plans sponsored by local governments?	General public employees - Do state governments provide any financial support for plans sponsored by local governments?
Alabama	No	No	No
Alaska	No local government plans	No	Statewide system
Arizona	No local government plans	Arizona subsidizes, within the Public Safety Personnel Retirement System, the Dept. of Public Safety member rates due to a pay raise offset agreement in FY 03	Within the Elected Officials Retirement Plan, state and county organizations are subsidized through court fees
Arkansas	No local government plans	Statewide system	Yes, in an inadvertent way (i.e. not by specific appropriation). The normal cost for state employees is about 10%, while that of city and county employees is 14.5% and 13.6% respectively. However, all employers pay 12.54%; therefore the inadvertent subsidy.
California	No local teachers' plans	No	No
Colorado	No	Only for one closed plan, the Fire and Police Protection Association	No
Connecticut	Statewide system, state pays employer contribution	No	No
Delaware	No local teachers’ plans	Yes: for County and Municipal Police and Firefighters’ COLA fund	No
Florida	No	Local police and fire districts may vote to assess a premium on casualty and property insurance policies sold within the district for the benefit of locally administered retirement plans. The assessment is added to the state premium tax. Companies receive a credit against their tax liability for the amount of the assessment levied, so in effect the assessment is a state subsidy. The local retirement plan may use the revenue only for enhancements to retirement benefits measured against the level of benefits existing in 1997.
Georgia	No	No	No
Hawaii	No local government plans
Idaho	No	No	No
Illinois	No	No	No
Indiana	State funds teacher benefits for the pre-1996 fund; for the fund established in 1996, school districts fund the employer share. Both are statewide funds.	The state guarantees that at least 50% of local government obligations for a now-closed plan is funded through state government revenues, primarily cigarette and liquor taxes and lottery income. The plan now in effect (the 1977 Plan) does not receive a state government subsidy	No
Iowa	There is one local government plan for teachers, that of the City of Des Moines, which receives no state support	No local government plans	No
Kansas	No local government plans	No	No
Kentucky	No active local government plans	No active local government plans except one in Lexington	No active local government plans
Louisiana	No	No	No
Maine	No local government plans
Maryland	No	No	No
Massachusetts	No	No	No
Michigan	No local government plans	No	No
Minnesota	The State of Minnesota provides direct aid to the St. Paul Teachers Retirement Fund Association (StPTRFA). The StPTRFA aid amount (FY 2006) was $4,803,000, or about 12.56 percent of the total noninvestment funding received by StPTRFA that year.	The state provides direct aid to the Minneapolis Firefighters Relief Association, the Bloomington Fire Department Relief Association, the Minnesota Fire Department Relief Association, and approximately 700 local volunteer firefighter relief associations. In calendar year 2005, the aid amounted to between 27% and 38% of the non-investment revenue received by the three named systems, and 77% of the non-investment revenue received by the volunteer relief associations.	The state provides direct aid to the Minneapolis Employees Retirement Fund (MERF). The MERF aid is $9,000,000 (Fiscal Year 2006), or 48.34 percent of the total non-investment funding received by MERF that year.
Mississippi	No	No	No
Missouri	No	No	No
Montana	No local government plans
Nebraska	Annual state contribution to Omaha school employees' plan--0.7% of payroll plus $873,000 for FY 2004.	No	No
Nevada	No local government plans
New Hampshire	No local retirement plans
New Jersey	No local government plans	No	No
New Mexico	No local government plans
New York	State categorical reimbursements for the New York City board of education include funding for pensions for teachers hired with the money.	No	No
North Carolina	No local government plans	A portion of court costs is directed to local retirement systems for local law enforcement officers. The state premium tax on homeowners policies for fire and lightning damage is allocated to the fire district where the house of the insured is located and can be used for supplemental retirement benefits or certain other programs to benefit firefighters at the discretion of the local fire district.	No
North Dakota	No	A portion of the state fire insurance premium tax is returned to local fire protection retirement associations.	No
Ohio	No	No	No
Oklahoma	Statewide system, employer contributions paid by district; some state tax revenues to pension fund	No	No
Oregon	No local government plans
Pennsylvania	No local government retirement plans	The Commonwealth imposes a tax on the premiums of casualty and fire insurance policies sold by out-of-state insurance companies. The Municipal Pension Plan Funding Standard and Recovery Act (Act 205 of 1984) establishes the General Municipal Pension. System State Aid Program (GMPSSA) financed from the proceeds of this tax. The act provides for the allocation of this money to municipalities (excluding counties and authorities) based upon the number of full-time employees participating in municipal retirement systems.	Yes. The Commonwealth imposes a tax on the premiums of casualty and fire insurance policies sold in PA by out-of-state insurance companies. The Municipal Pension Plan Funding Standard and Recovery Act (Act 205 of 1984) establishes the General Municipal Pension System State Aid Program (GMPSSA) financed from the proceeds of this tax. The act provides for the allocation of this money to municipalities (excluding counties and authorities) based upon the number of full-time employees participating in municipal retirement systems.
Rhode Island	No local government retirement plans	No	No
South Carolina	No local government retirement plans
South Dakota	No	No	No
Tennessee	Some local government education support staff are covered by local government plans There is no specific state subsidy for local governments' payment of the employer portion of teachers retirement contributions.	Some state funding for local government is intended to support personnel benefits. It may or may not be used for pension contributions.	Some state funding for local government is intended to support personnel benefits. It may or may not be used for pension contributions.
Texas	No	No	No
Utah	No local government retirement plans
Vermont	No local government retirement plans
Virginia	No	No	No
Washington	No local government retirement plans	No local government plans for public safely personnel.	Three city plans. No state subsidy.
West Virginia	Yes, partly through school aid formula and partly through lump sum payments to the retirement fund	Through allocation of state insurance premium tax collections, and, a share of table gaming revenues	No
Wisconsin	No	No	No
Wyoming	No local government retirement plans	No local plans	No local plans