An Urgent Problem

State and local politicians have racked up a record amount of pension debt in the last decade, putting public workers’ retirements at risk and leaving hundreds of public pension systems on shaky ground.

The Facts

Pension Debt Is at an All-Time High

State and local governments owe workers at least $1.9 trillion for retirement benefits they have already earned. If politicians don’t take action now, the problem will only get worse.

Governments’ Costs Are Growing

Government revenue growth stagnated during the last decade-and-a-half while cities’ and states’ required pension contributions nearly tripled between 2001 and 2016.

Plans Aren’t Meeting Workers’ Needs

Millions of workers are depending on public pensions, but most will leave public service without enough savings to achieve a secure retirement.

Pension debt is driving up the cost of providing retirement benefits to workers, causing governments’ pension payments, as a percentage of payroll, to nearly triple since 2001. This problem has been compounded by the fact that government revenue growth has stagnated, leaving officials with less money to Printcover day-to-day operations and to invest in infrastructure, public safety, and education. Despite the fact that cities and states are allocating more taxpayer dollars to pensions each year, these government contributions are still falling short of the amount needed to fully fund pension promises—and, as a result, debt continues to increase.  In an effort to contain these costs, many cities and states have reduced benefits for new and current workers. Not only has this placed an unfair burden on public workers, it has done little to actually solve the problem.

Nearly every state and local government in the country has a significant pension funding problem, and if politicians continue to kick the can down the road, the consequences will be disastrous for the millions of firefighters, police officers, teachers, and other public servants who are counting on pension plans for their retirement. While some believe that pension funds are too big to fail, places like Chicago and Detroit demonstrate the very real and crippling impact of runaway pension debt on local economies and communities. Without comprehensive reform, more governments could find themselves facing a financial crisis. The good news, however, is that such a scenario is not a foregone conclusion for most cities and states. By taking action now to fix their pension problems, local leaders can protect workers and taxpayers and ensure that governments remain financially stable for years to come.

An In-Depth Look

Debt Is Likely Higher Than Governments Estimate

Debt Is Likely Higher Than Governments Estimate

Unfunded pension liabilities are already the largest source of debt for state and local governments—and the problem could be much worse than many politicians are willing to admit. Even minor fluctuations in realized market returns translate into sizeable differences in pension costs.

Pensions Are Riskier Today

Pensions Are Riskier Today

As pension debt continues to grow, more and more governments are turning to one-time fixes and chasing improbable investment returns in an effort to close the gap between plans’ assets and the retirement promises made to workers. These irresponsible funding policies are threatening the security of workers’ hard-earned retirement benefits and have left taxpayers on the hook to make up the difference if the investment strategy fails.

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What Are the Causes?

How Do We Fix It?

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