Pension Costs Mean State & Local Governments Not Balancing Budgets

Barb Wire

BarbWire covers the bankrupt moral thinking of the political left and everyone knows what liberal policies have done to the fiscal condition of the federal government. Fewer Americans are aware of how liberal math has impacted state and local governments. At a recent Manhattan Institute event a roundtable discussion was held with this title:


How bad is it? One of the panelists, Joshua Rauh, a professor of finance at the Stanford Graduate School of Business, gave part of the answer:

“When I look at the data … contributions to public employee pension systems … have risen dramatically in the last 12 years. They have gone from about $50 per capita per year on average to about $250 per capita per year. The reality is that even those contributions are not enough to reflect the economic costs of the pensions. And what that means is still not enough is being contributed so they are destined rise even more unless very fundamental reforms are made.”

Professor Rauh also cited a recent article that reported that Chicago property taxes will have to double in 2015 order to pay the pension bill. Rauh continued:

“So this is a critical problem that is impacting city and state governments across the U.S. The constant cost mismeasurement that is going on has led to the problem getting worse and worse and worse.”

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One of the key points is that the costs of these public employee pension promises are still not properly being reflected in government budgeting so that as a result there is really no state or local government across the U.S. — that sponsors any kind of defined benefit pension plan (which is most of them) — there is no state or local government in the U.S. that has run a balanced budget in any economic sense in a very long time regardless of what their own governmental accounting says.

You can watch the panel discussion here:

Watch live streaming video from manhattan_institute at

The opinions expressed by columnists are their own and do not necessarily represent the views of Barb Wire.

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