The Next Big Financial Crisis That Could Cripple Cities

Cities are constantly righting the wrongs of decades past. The miscues of the urban renewal era – windswept plazas, hulking parking garages, and the elevated freeways blasted through downtowns across the country – have kept planners busy over the last 50 years. But there are other policies that have a lasting and devastating impact on the health of cities. That’s currently on sad display as municipalities try to deal with the ticking time bomb of public employee pensions. State government pensions have dominated the headlines, beginning, as ever, with California. Less well known is the plight of local governments, struggling with the very same problem. There are 220 state pension plans but nearly 3,200 locally administered across the nation, wreaking havoc on municipal budgets already in tatters. Like many urban renewal plans, generous pensions for a range of city employees were established with the best of intentions, in the context of another era. Awarding pensions – long since been phased out in the private sector and replaced with individual retirement accounts to which employers often contribute over the course of one’s career – was seen as a way of rewarding public service, particularly for salaries that were not competitive with the private sector. More