Via the new John Micek blog, a great article on the under-discussed problem of municipal pensions from Nick Malawskey. I’ve written about this issue before here, trying to get a conversation started on a progressive agenda for municipal pension reform. The problem, as ever, is that there are way too many different pension plans and way too many different municipalities:
How big is the issue?
Well, for starters there are more than 3,000 — yes, 3,000 — individual pension programs for employees of cities, boroughs, townships and municipal authorities.
And the number of plans increases each year.
Put another way, Pennsylvania’s municipal pension plans account for more than quarter of all local government pension plans in the United States.
While the plans may be for local government employees, the state — and ultimately the taxpayer — still contributes to the cost. In 2011, the state spent more than $200 million to help fund the system, while local governments kicked in close to $1 billion.
That means that costs are not spread over as many people, and the systems do not benefit from any economies of scale.
For example, the cost to administer a small system is, on average, more than $1,500 per member. In a larger system, the cost-per-member averages around $300.