A new analysis found that 70% of the 75 largest US cities were insolvent in FY 2022, unable to pay all their bills.
The majority received D grades for fiscal health from Truth in Accounting.
“While pension and other post-employment costs, such as health care, will not be paid until the employees retire, they still represent current compensation costs earned and incurred throughout their tenure,” the analysis said.
“In 2022, the cities continued to receive and spend federal COVID-19 relief funds, and as the U.S. economy reopened, they took in additional tax revenue. Such economic gains were offset by increases in their pension liabilities, which were caused in large part by decreases in the market value of pension investments,” the analysis said.
Pension and retiree healthcare obligations constituted most of the $595 billion in total debt among these cities, despite having only $307 billion in assets.
Many cities understate costs by excluding future pension and benefit expenses from budgets, instead deferring these costs to future taxpayers.
“Over the past few years, investment market values have swung dramatically. In 2022, this volatility negatively impacted most cities’ pension investments and their financial condition, which demonstrates the risk to taxpayers when cities offer defined pension benefits to their employees,” the analysis added.
Declines in pension fund market values further worsened conditions in 2022.
The cities with the highest taxpayer burdens were predominantly Democrat-run and included New York City, Chicago, and Philadelphia.
“The five cities with the greatest surpluses were Washington, D.C. ($10,700), Irvine, California ($6,100), Plano, Texas ($5,100), Lincoln, Nebraska ($4,100), and Oklahoma City ($2,900). Rounding out the top ten with the greatest surpluses were Aurora, Colorado; Fresno, California; Raleigh, North Carolina; Virginia Beach; and Corpus Christi, Texas,” the analysis revealed.
The analysis shows cities have risked taxpayer funds by offering unsustainable defined pension benefits despite volatile investment markets.
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