The sustainability of public sector pension plans is an issue of great fiscal concern for state and local governments in the United States. According to government reports, state public sector pension plans confront a total unfunded liability of $842 billion. Underfunding of this magnitude presents a serious fiscal problem for individual governments and will require a growing amount of budgetary resources to fund benefit promises to retired workers.
This paper examines the fiscal health of the states, focusing on two worrisome characteristics: an understatement of unfunded pension liabilities and ever-increasing expenditures, driven primarily by health care costs.
This study focuses on public sector benefits costs in the state of New Jersey. Along with several other states, New Jersey’s pension system is badly underfunded and health care and other benefits for public sector workers are entirely unfunded.
Cities across the United States are facing $7 trillion in outstanding pension liabilities. This conference, part of the Anton/Lippitt Conference on Urban Affairs at Brown University, shed light on how municipalities are addressing this financial challenge.
States like California and New York are living off the accumulated capital of past economic freedom. Now that the political tide has turned decisively against economic freedom in those states, they are shedding people and jobs and growing more slowly than the rest of the country. Places like the Dakotas, Carolinas, Oklahoma, and Texas, which have reversed their anti-market policies of the past, represent America’s dynamic economic future.
People follow jobs, and jobs follow freedom. That's one of the main results from the third and much improved edition of the Mercatus Center's "Freedom in the Fifty States: Index of Personal and Economic Freedom."
Google's auto-complete feature has long been a source of amusement, but as a recent feature on BuzzFeed makes clear, it also says a lot about what it's like to live and work in different states in the country.
Several high-profile municipal bankruptcies have drawn attention to the rising tab for public worker benefits, due to undervalued and underfunded pension plans. But some of the biggest recent fiscal emergencies, which have swallowed up the financial resources of Jefferson County, Ala. and now threaten Baltimore and scores of other local and state governments, have another cause: the use of the "too-good-to-be-true" debt instrument—otherwise known as the interest rate swap.
State and local budgets across the nation have a basic accounting problem. The cost of employee benefits is rising fast relative to current revenues. And worse yet, the tab to fund pensions is steeper than government accounts recognize.
As this chart by Mercatus Research Fellow Matthew Mitchell demonstrates, over time, states have increasingly come to rely less on general fund sources and more on federal sources, dedicated sources, and borrowed sources.
Eileen Norcross is a senior research fellow at the Mercatus Center at George Mason University. Her primary research interests include fiscal federalism and institutions, state and local governments, and economic development.