City Pensions Not the Burden Media Suggests

October 24, 2013 ( – Since the bankruptcy of Detroit, media stories suggest  pensions are a significant expense for American cities and may lead to more widespread economic challenges.

The Center for State and Local Government Excellence’s issue brief, “Gauging the Burden of Public Pensions on Cities,” includes a comprehensive measure of the expense city taxpayers face in funding the pensions of city and county general government workers and teachers. For the full sample, overall pension costs borne by city residents amount to 7.9% of revenue.

In terms of individual cities, taxpayer costs average 2.7% of revenue for the least expensive fifth of cities and 12.3% for the top fifth. Among major cities, Chicago, New York, and Philadelphia have very high pension costs. Detroit was number 61 primarily because it issued Pension Obligation Bonds in 2005, which increased its overall borrowing costs but reduced its reported pension expense. 

The study concluded that pension costs are closer to 5% of revenue than to 50% for cities, even in the wake of two financial crises and the Great Recession. However, in those cases where pensions are both expensive and underfunded, they exacerbate fiscal problems. 

The report authors noted that financing of pensions at the local level is more complicated than city money going to local plans or to state plans. In addition, cities have school districts that make contributions directly to state plans and get their money either directly from the city or through a separate levy. Further, residents of cities also contribute to the financing of county governments that sponsor plans or contribute to state systems. 

The brief was authored by Alicia H. Munnell, Jean-Pierre Aubry, Josh Hurwitz and Mark Carafelli of the Center for Retirement Research at Boston College.

The full brief is available at