Why City Pension Problems Have Not Improved, and a Roadmap Forward

This paper appears in In Urban Fiscal Stability and Public Pensions, Susan M. Wachter, ed. University of Pennsylvania Press, Forthcoming. This paper studies the evolution of city-level pension liabilities over the period 2009-2013 for ten large U.S. municipalities: New York City, Los Angeles, Chicag...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Author Rauh, Joshua D
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2015
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Summary:This paper appears in In Urban Fiscal Stability and Public Pensions, Susan M. Wachter, ed. University of Pennsylvania Press, Forthcoming. This paper studies the evolution of city-level pension liabilities over the period 2009-2013 for ten large U.S. municipalities: New York City, Los Angeles, Chicago, Houston, Philadelphia, Jacksonville, San Francisco, Baltimore, Boston, and Atlanta. Despite increases in public equity valuations of around 75 percent over this time period and public attention called to pension reform, the difference between liabilities under governmental accounting measures and the market value of assets fell by an average of less than 2%. Implementing a market value of liability (MVL) approach that values liabilities using bond yields rather than expected returns on assets, unfunded liabilities rose in all ten cities, and the total rose by 40%, from $277 billion to $359 billion. I provide a roadmap of policy options to address city-level pension imbalances in light of the fact that pension liabilities have continued to grow despite an environment of very robust returns on pension fund assets.