State and local owe enormous obligations to retirees

The Allegheny Institute has a new policy report examining the pension plans of the 10 largest Pennsylvania cities. They find these plans have a combined unfunded liability of $4.5 billion at the end of 2007 (this would have increased given recent market declines).  Pension plans for Scranton, Philadelphia, and Pittsburgh were in much worse shape than the other big cities – all below 60% funded.

They also found that pension plans from all other local governments in PA (representing about 40% of the total membership, vs. 60% from the ten largest cities) were much better funded at that time – 96% of overall liabilities, vs. only 57% for the big cities.  They conclude that consolidating the pension plans would be a bad move for most of the state.

From a national perspective, USA Today has an excellent piece on the outstanding liabilities of state and local governments to retired employees for health benefits (the previously unknown “third leg” of the stool):

Nebraska is the only state in the country that owes nothing for the medical care of retired government workers [because they don’t provide any]. The other 49 states have an unfunded obligation of $445 billion, according to a USA TODAY survey. …


The USA has 89,437 branches of local government, according to the Census Bureau. A USA TODAY survey of 25 midsize to large governments found a retiree medical obligation of $126 billion.