1、1ReportAbout US The Manhattan Institute is a think tank whose mission is to develop and disseminate new ideas that foster greater economic choice and individual responsibility.Executive SummaryMany American cities are in a quandary.For decades,they have promised generous pensions to police officers,
2、firefighters,and civil servants,who helped make them successful.But now,the deferred costs of this model are squeezing current services.The combined effect of preexisting pension costs,the end of a bull market,and the Covid-induced exodus of office workers and affluent residents is that cities are w
3、atching their revenues top out while they owe billions of dollars to retired and soon-to-retire city employees.Cities have frequently responded to balance-sheet strain by cutting servicesespecially policing,thus reducing urban quality of life.Tax increases are another possible response,but they also
4、 drive urban exodus.A one-two punch of higher taxes and diminished services threatens to push cities into an urban doom loop:affluent residents and businesses flee cities,which,in turn,reduces tax revenues and services,leading to even more outmigration.As American cities look beyond the pandemic sho
5、ck,they face the dual challenge of covering pension obligations to former workers while upholding service responsibilities to current inhabitants on tighter budgets.This paper examines the revenue and pension spending nexuses of Americas 10 largest cities by population(New York,Los Angeles,Chicago,H
6、ouston,Phoenix,Philadelphia,San Antonio,San Diego,Dallas,and San Jose)as we enter the post-pandemic era.Big City Pensions and the Urban Doom Loop Daniel DiSalvosenior fellowManhattan InstituteJordan McGillisPaulson policy analystManhattan InstituteApril 2023群内每日免费分享5份+最新资料 群内每日免费分享5份+最新资料 300T网盘资源+4
7、040万份行业报告为您的创业、职场、商业、投资、亲子、网赚、艺术、健身、心理、个人成长 全面赋能！添加微信，备注“入群”立刻免费领取 立刻免费领取 200套知识地图+最新研报收钱文案、增长黑客、产品运营、品牌企划、营销战略、办公软件、会计财务、广告设计、摄影修图、视频剪辑、直播带货、电商运营、投资理财、汽车房产、餐饮烹饪、职场经验、演讲口才、风水命理、心理思维、恋爱情趣、美妆护肤、健身瘦身、格斗搏击、漫画手绘、声乐训练、自媒体打造、效率软件工具、游戏影音扫码先加好友，以备不时之需扫码先加好友，以备不时之需行业报告/思维导图/电子书/资讯情报行业报告/思维导图/电子书/资讯情报致终身学习者社群致
8、终身学习者社群关注公众号获取更多资料关注公众号获取更多资料2Big City Pensions and the Urban Doom LoopThe key findings are:Pension spending increased in all of the 10 largest American cities over the last decade,with a few cities experiencing a doubling or even tripling of their expenditures in 2021 dollars.Almost all cities saw
9、an increase in pension spending per employee.There is large variation in the amount per employee that American cities are spending on pensions.To respond to rising pension demands,some cities have reduced employment,often in the area of public safety.A worsening market environment for pension funds
10、will necessitate increased pension expenditures by cities in 2023 and beyond,exacerbating pressures to limit or reduce employment and,thus,city services.To avoid the vicious cycle of deteriorating urban conditions spurring more outmigration,cities need to consider a host of policy options.We recomme
11、nd the following:1.Petition state governments to change pension statutes to allow for defined-contribution options for new hires.2.Alter existing pension formulas for new hires to require more years before a full pension can be earned.3.Identify ways to improve service efficiency without investing i
12、n greater human capital.IntroductionThe Covid-19 pandemic induced great financial instability for Americas big cities.Pension financing,which constitutes a substantial slice of municipal expenditures,rose and fell,as well.A bull market in 2021 was followed by a market collapse in 2022,wiping out the
13、 gains made by state and local pension funds over the previous decade.Pension funds are heavily dependent on their investment portfolios.When the stock market hit new highs in the fall of 2021,the average funding levelassets as a share of liabilitiesof state and local pensions rose to 85%,the highes
14、t point in the last 15 years,which reduced unfunded liabilities.1 But the high quickly wore off.The market decline of 2022 pushed funding levels down roughly 15%,and unfunded liabilities have increased.Funding ratios have slumped to where they were a decade ago.2 In 2023,state and local governments
15、will have to contribute more to these pension plans to compensate for the market shortfalls,3 which will further strain city budgets.The rise of work-from-home has also led some businesses and residents to leave American cities,which presents real risks to cities public finances.The value of commerc
16、ial real estate has fallen,which will likely reduce important commercial property-tax revenues.4 Furthermore,fewer riders on public transportation mean that local governments must cover the costs of decreased fare revenues,as the costs of subway and bus systems are largely fixed.Contacts To request
17、an information packet about MI,or if you have questions about how to support us,contact supportmanhattan-institute.org.52 Vanderbilt Ave.New York,NY 10017(212)599-7000infomanhattan-institute.org3Big City Pensions and the Urban Doom LoopWhile economic theory would predict that lower prices will attra
18、ct new entrants to pick up the market slack,urban theorists worry that this time will be different.With a redistribution of economic activity out of urban cores,many downtown areas face what Arpit Gupta,professor of finance at New York University,calls an urban“doom loop.”5 In this scenario,reduced
19、economic activity and lower daytime populations downtown invite increases in antisocial behavior,preventing the rebounds that have generally followed past downturns.Continual underperformance of commercial real estate leads to lower tax revenues and precipitates service cuts,pushing cities further d
20、own the negative spiral.To respond to these challenges,city governments have limited options.In the long term,some cities might alter zoning and land-use policies to permit the repurposing of commercial structures that are in less demand due to the increase in work-from-home.In the short run,however
21、,given balanced budget requirements,city governments must either raise new tax revenue or cut public spending.Raising new revenue is politically unpopular and bad for the business climate.Cutting spending threatens quality of life,insofar as city governments are unable to provide sufficient public g
22、oods such as transit,schools,policing,and sanitation.If affluent,mobile residents continue to leave citiesas some analysts worry that they willthe result may be a pattern whereby budget cuts promote more outmigration,which promotes further budget cuts and more outmigration and,ultimately,urban decay
23、.6 In this paper,we tracked big-city government pension expenditures prior to,during,and after the Covid-19 pandemic by gathering data from cities Annual Comprehensive Financial Reports(ACFRs).7 We focus on Americas 10 largest cities by population because population is a rough proxy for the signific
24、ance of a metro area.In fact,these cities combined account for nearly 8%of the total U.S.populationand,of course,these cities and their metro areas together account for a much larger share.The trajectory of these cities is clearly of national concern.By focusing on the big cities,we hold in abeyance
25、 the debate over whether local public pension systems in general are in crisis or whether the crisis is confined to a few municipalities.8 Our data provide a glimpse into how these cities pension expenditures have changed over the last decade,including in the tumultuous pandemic period.By connecting
26、 these local pension expenditure figures to city government budget numbers,we explore whether growing pension expenditures are associated with employment reductions.Note that city officials have limited control of their pension expenditures and usually cannot easily reduce spending on pensions,the c
27、osts of which are largely fixed.9 Therefore,cities have only three potential responses to rising pension costs:they can increase revenues,reduce expenditures on other items,or reduce employment.The last option is often the most effective because city governments are highly human-capital intensive,an
28、d a large portion of city budgets is allocated to employee compensation.We find that between 2011 and 2021,pension expenditures increased(in inflation-adjusted dollars)in all of the 10 largest American cities.In some cases,the increases were very large.But each city responded somewhat differently to
29、 increased costs.Some cut employment,especially in the area of public safety.10 Others adopted questionable new financing mechanisms or economic growth strategies.Ultimately,if a city seeks to address the pension crunch by keeping the employee headcount downoften by leaving vacancies unfilledit must
30、 also improve productivity,or public services will deteriorate.This is a major factor in avoiding the urban doom loop.4Big City Pensions and the Urban Doom LoopBackgroundDefined-benefit pensions operate as follows:workers and their employers each make contributions to a fund(although sometimes in th
31、e public sector,the employees share is paid by the employer),which is governed by a politically appointed board that makes broad investment decisions about how to allocate the money.The fund is then used to pay an annuity-like stream of income to workers when they retire.The“defined benefit”means th
32、at a certain percentage of a workers final average salarydetermined by a formula that takes into account the number of years on the job and average salary over the last three to five years of employmentis paid for the remainder of the retired workers life.The basic structure of public pension plans
33、raises a problem.By providing a guaranteed stream of income in retirementregardless of whether the pension funds assets and market performance are sufficient to make those payoutssuch plans expose taxpayers to considerable risk.If the plans are underfunded,public budgets,and ultimately taxpayers,mus
34、t come up with the money to make the contractually guaranteed payouts.Most state and some local employees are enrolled in huge state-run pension plans,but many big-city governments operate their own plans.Collectively,in our 10 municipalities,there are 21 distinct plans.In our sample,only San Antoni
35、o contributes to a large state-run plan(Table 1).Table 1 New York CityPhoenixNew York Employees Retirement System(NYCERS)City of Phoenix Employees Retirement SystemNew York City Board of Education Retirement System(BERS)New York City Fire Pensions Fund(NYCFPF)PhiladelphiaNew York City Police Pension
36、 Fund(NYCPPF)Philadelphia Public Employees Retirement SystemNew York City Teachers Retirement System(TRS)San DiegoChicagoSan Diego City Employees Retirement SystemMunicipal Employees Annuity&Benefit Fund of Chicago(MEABF)Laborers&Retirement Board Employees Annuity&Benefit Fund(LABF)DallasPolicemens
37、Annuity&Benefit FundEmployees Retirement Fund(ERF)Firemens Annuity&Benefit FundDallas Police and Fire Pension System(DPFP)Los AngelesSan JoseLos Angeles City Employees Retirement System(LACERS)Federated City Employees Retirement SystemLos Angeles Fire and Police Pensions(LAFPP)Police and Fire Depart
38、ment Retirement PlanHoustonHouston Municipal Employees Pension SystemHouston Firefighters Relief and Retirement FundHouston Police Officers Pension System5Big City Pensions and the Urban Doom LoopToday,some 456,729 people work for the 10 city governments studied here,almost all of whom are eligible
39、for a traditional defined-benefit pension.The problem is that some of these city governments have not set aside enough money to pay for all the benefits that they have promised to current and former workers.Another issue is that some of these plans are very costly,even if the city has been prudent i
40、n setting money aside to pay for them.The best available data on a citys pension contributions are in its ACFRs.By looking at pension expenditures in isolation,we focus on what pensions are costing a city each year.For each city and each year,we also calculate total pension expenditures as a percent
41、age of general revenue,which shows how much of all city revenue is allocated to pensions,and total pension expenditures per full-time employee(FTE).The latter is a useful measure of pension-induced fiscal pressure because a citys pension contributions are,in part,a result of the size of its workforc
42、e.If a city hires more workers,its pension contributions will increase because it must contribute on behalf of more people.Therefore,hiring more workers creates greater long-run liabilities,adding to the cost per worker.Finally,we calculate the percentage change in total city employment from 2011 to
43、 2021.These figures form the basis of our analysis.City TrendsThe first thing to consider when thinking about the trajectory of Americas biggest cities is their population trends.Cities that are growing rapidly will need to increase the size of their public workforces to provide sufficient services
44、to incoming residents.Those with slow growth(or decline)need to consider ways to trim their number of public workers to correspond to a smaller tax base.In Table 2,we display the population trends over roughly the last decade for the 10 cities examined here.Table 2 City Population TrendsIncreaseYear
45、sNew York City0.40%20112019Los Angeles4.19%20122021Chicago1.88%20122021Houston7.97%20122021Phoenix12.75%20122021Philadelphia2.59%20122020San Antonio17.25%20112020San Diego6.79%20112020Dallas8.03%20122021San Jose9.38%20112020Looking across all of Americas biggest cities over a decade(201121),the data
46、 we gathered provide six important lessons.6Big City Pensions and the Urban Doom Loop1.Pension Spending Increased EverywherePension spending has increased in all 10 cities.Some cities saw huge increases,such as Chicago(175%),Phoenix(202%),and San Jose(116%).Others saw quite large increases,such as D
47、allas(42%)and Houston(44%).Meanwhile,New York(15%),Philadelphia(16%),San Antonio(17%),and San Diego(20%)managed to keep the expenditure increases down,by comparison(Table 3).Table 3 Percentage Change in Pension Expenditures,201121New York15%Los Angeles*16%Chicago175%Houston44%Phoenix202%Philadelphia
48、16%San Antonio17%San Diego20%Dallas42%San Jose116%*Since 20132.Most Cities Increased Spending per EmployeeMost of the cities studied here substantially increased their pension spending relative to the number of people they employ,a key indicator of spending vs.services.In some cities,such as Phoenix
49、(218%),Chicago(188%),and San Jose(102%),the increases were huge.In others,such as San Diego(0.1%),New York(6%),and San Antonio(7%),they were modest(Table 4).Table 4 Percentage Change in Pension Expenditure per FTE,201121New York6%Los Angeles*13.90%Chicago188%Houston50%Phoenix218%Philadelphia15%San A
50、ntonio7%San Diego0.10%Dallas26%San Jose102%*Since 20137Big City Pensions and the Urban Doom Loop3.In Absolute Terms,Pension Spending per Employee Varies GreatlyThough increases were seen across the board,there is large variation in the absolute amount per FTE that Americas big cities spend on pensio
