The bankruptcy filings of large municipalities, like Detroit and Stockton, Calif., highlight a growing problem that needs more than a temporary fix.
Many, if not most, municipal governments are awash in pension debt. Lots of states are in the same boat. Part of the problem is today's artificially low interest-rate environment, which has played havoc with pension assets and liabilities. Part of the problem also is a long history of governments not making the required contributions to their plans. Now they don't have the money to do so, and the debt has become debilitating. It's gotten so bad that many cities have found themselves paying more for retiree benefits than they do for public services such as fire and police.
About 21,000 retired workers receive pensions from the city of Detroit; the average annual benefit for retired municipal workers there is $19,000. Retired police officers and firefighters receive an average of $30,500.
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