U.S. state and local governments are facing a looming pension crisis. This is not only a critical problem for the U.S., but the underlying demographics suggest similar problems on the horizon in most other developed countries around the world.
"Nearly all the 14 million people who work full time for state and local governments are eligible for traditional pensions, which guarantee a fixed lifetime income for those who have worked for those governments for a certain number of years. To pay for those retirement benefits, governments are supposed to contribute money to their pension funds each year — enough to cover the benefits earned by their employees during that year. But governments have underfunded those pensions by at least $1.28 trillion — and probably much, much more. Current state and local government employees and retirees will almost certainly get their pensions. Public pension benefits are backed by strong legal guarantees and have to be paid even if governments haven’t saved enough money. But the state and local governments face an enormous problem: Now they are contributing more and more toward pensions each year, both to pay for the more generous benefits and to make up for the accumulated shortfalls. ... Most local governments are not responding by increasing revenue — e.g., raising fees or taxes. Instead, they typically try to make ends meet by cutting local government staffing. ... And governments are cutting an array of municipal and county workers, including police, firefighters, and sanitation employees. ... Out of the public eye, public-sector pension expenditures are quietly and persistently eating into local government budgets. As a result, local government workforces in many places are shrinking. This doesn’t just mean fewer government jobs to go around. It means that all those who rely on local government services are in danger of losing those supports. Many Americans take for granted that their local governments will provide public services like police protection, fire protection, street sweeping and refuse collection. But it may well become harder for local governments to carry out those basic functions — because of rising pension costs." www.washingtonpost.com/politics/2019/08/05/silent-pension-crisis-is-eating-away-local-government-services-heres-what-you-need-know
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