Full Citation
Title: Pension Pressure: Impact of Public Pension Fund Liabilities on Cities
Citation Type: Miscellaneous
Publication Year: 2022
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Abstract: Most U.S. cities have defined-benefit pensions for their public workers, creating an obligation that exposes sponsoring cities to shortfall risk. Large funding gaps in recent years have required increased pension payments and generated fiscal stress for cities. To analyze the effect of this "pension pressure", I assembled a novel dataset which captures the universe of cities and their pensions in California from 2003 to 2016. I focus on the changes in city unfunded liability contributions. These mandatory, externally determined payments are plausibly exogenous to cities' year-to-year spending needs. Using a first differences empirical specification, I find that cities primarily reduce non-current expenses, specifically capital investment. I also show that cities cut payrolls and employment, with police employment declines specifically. Further, there are accompanying increases in crime rates. These estimates imply that pension pressure impairs local public service provision, with contributions displacing other spending.
Url: https://tylerjamesludwig.com/documents/Ludwig_California_Pensions.pdf
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Authors: Ludwig, Tyler
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Data Collections: IPUMS NHGIS
Topics: Aging and Retirement, Land Use/Urban Organization, Poverty and Welfare
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