Should Portland join in begging for a pension bailout?
The cities of Philadelphia, Atlanta, and Phoenix are pounding on Congress' door this weekend, crying out for billions of federal dollars to help alleviate budget problems being caused by their large unfunded pension liabilities -- the expensive contract promises they once made to now-retired city employees. These cities have some money put aside to pay the pensions, but the numbers of retirees are swelling, and the obligations to pay each of them a set amount every month for life are beginning to have a serious impact on the municipalities' budgets.
In one important sense, Portland is worse off than any of these three cities, because Portland has nothing put away to pay its retired and disabled police and firefighters, except for those hired in the last two years. Portland's unfunded liability for these pensions currently stands at nearly $2.5 billion, and the city's got to come up with it all on a pay-as-you-go basis. In other words, the money goes straight from property tax collections in any given year to the retirees and their spouses who are still alive and collecting that year. Nothing is put away for the future.
When you stack the Portland pension liability next to those of Philadelphia, Atlanta, and Phoenix, Portland's is by far the worst on a per-resident basis. According to a recent study by the Economy League of Greater Philadelphia, sponsored by the Pew Charitable Trust, here is the comparison of the three cities currently asking for bailouts -- and I've added Portland's picture in at the bottom. The Pew report uses "the most recent available audited financial statements," which I take to mean as of June 30, 2007; I use Portland's from that date:
|City||Unfunded actuarial accrued liability||Population||UAAL per capita|
Of course, given the financial disasters of the past couple of months, things have gotten worse for all these cities, but it's clear that Portland's pension picture is as bleak as any. Of the 10 cities profiled in the Pew report, only Boston, at $3,589.54 per capita, was deeper in hock than Portland.
And so rather than traipsing off to Prague to watch them build streetcars, shouldn't Sam the Tram be taking a less glamorous sojourn to D.C., and leaning on Earl the Pearl and Gatsby Wyden to fork over some dough before we join Philadelphia in the Big Financial Flush?
On the other hand, what the heck? Maybe it's better to let the city go bankrupt in a decade or so and get rid of the spendy government pensions that way. If the police and firefighters don't think it can happen, they ought to check with their uncles, the airline pilots, who found out the hard way about unfunded pension obligations.