Pensions in the Trenches: How Pension Spending Is Affecting U.S. Local Government

Abstract

Some experts claim that U.S. local governments are experiencing dramatic increases in pension expenditures and that pension spending is crowding out government services. Others maintain that serious pension problems are limited. This issue is important to political scientists, urban scholars, and policy practitioners, but no existing studies—nor the datasets they rely on—allow evaluation of whether pension expenditures are rising or how they are affecting local government. This article analyzes a new dataset of the annual pension expenditures of over 400 municipalities and counties from 2005 to 2016. I find that pension expenditures rose almost everywhere over this period, but there is significant variation in that growth. On average, local governments are not responding to rising pension spending by increasing revenue. They are instead shrinking their workforces. Moreover, I find that the magnitude of the employment reductions due to pensions varies with key features of the political environment.