Retiree Benefits: Tale of 2 Cities (States)
Some of the workers and retirees around the country who count on having a government pension surely get nervous when they see headlines about the most troubled state and local plans – in places like Illinois, New Jersey, Connecticut, Chicago, and Detroit.
A broader perspective on retirement benefits, however, shows that the results are more mixed. A study by the Center for Retirement Research, which sponsors this blog, estimated long-term costs for pensions, retiree health benefits, and general debt service as a share of revenues for the 50 states, 178 counties, and 173 cities.
The findings are summarized below:
- Many states’ combined costs – pensions, other post-employment benefits (OPEBS) such as health insurance, and payments on all government bonds – appear manageable.
- More worrisome are the eight states with the highest combined costs: Illinois, New Jersey, Connecticut, Hawaii, Kentucky, Massachusetts, Rhode Island, and Delaware. [States with high pension burdens also tend to have high costs for retiree health benefits].
- The combined costs are also manageable for many of the counties analyzed.
- But California, with its system of large county governments, has six of the seven U.S. counties with the most burdensome long-term costs; the other is Cook County, surrounding Chicago.
- Like states and cities, the picture overall is a mix of a handful of deeply troubled jurisdictions and many where the costs appear manageable.
- The eight major cities with the highest total cost burdens range from the predictable – Chicago and Detroit – to surprises such as Wichita, Kansas, and Portland, Oregon.
Make no mistake: the state and local governments with the largest cost burdens face enormous challenges and unpleasant solutions. But the general situation isn’t nearly as dire as the worst headlines indicate.
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