Editor’s Note: This piece is an ongoing investigative series in partnership with Watchdog.org’s state-level journalists. Pension budget woes beset nearly every state in the union, and cities and municipalities are also being hit with unprecedented pension debt. Baby boomers are retiring. Some state and local budgets allocate more funds for pensions for retirees than they use for actual services and current worker pay. Once again, the younger generation is saddled with debt from a previous profligate era.
Charlotte, North Carolina, holds a unique position among the top 20 most populous cities in the country.
It has enough money to pay its bills.
According to Truth in Accounting, a Chicago-based fiscal watchdog, 95 percent of the largest cities in America have financial obligations in excess of assets available to pay for them.
What makes Charlotte unique? Its pension debt.
City officials have promised public workers pension benefits the city can afford.
Brad Young, spokesman for the North Carolina treasurer’s office, told Watchdog.org the high-funding status, relative to other public pension funds, is attributable to “consistent annual funding from the North Carolina general assembly, consistent use of conservative actuarial assumptions and an approved actuarial cost method since the establishment of the systems.”
That said, researchers identified $117 million in unfunded pension liabilities from actuarial reports — much more than the $36 million pension asset reported on the city’s balance sheet — and another $245 million in off-the-books retiree health care benefits.
Still, the city of 827,000 is firmly in the black.
Charlotte has $14.9 billion in assets, according to its comprehensive annual financial statements. Most of them, however, are illiquid capital assets such as roads, buildings and land. Another $780 million is restricted by law or contact. But the remaining $2 billion is more than enough to pay for the city’s $1.2 billion in bills as they come due.
The difference equates to a $3,300 surplus per taxpayer.
In contrast, Columbus, Ohio, is next in line on the accounting group’s Financial State of Cities analysis, with $1.3 billion in unfunded pension liabilities. When added to its other financial obligations, Columbus taxpayers would have to pay about $2,700 each for the city to be debt-free.
New York City is at the other end of the spectrum, with the largest public pension debt of any city in the country at $56 billion. According to financial statements, it also has $75 billion in additional unfunded retiree health care commitments.
The retirement obligations combine to represent 59 percent of New York City’s bills. With $222.6 billion in total obligations and just $55 billion in available assets to pay for them, the steep shortfall amounts to $61,000 per taxpayer.
“Unless these pension and retiree health care benefits are renegotiated, future taxpayers will be burdened with paying for these benefits without receiving any corresponding government services,” researchers said.
According to a study by Pew Charitable Trusts, revenue needed to fill funding gaps often comes from the same pool of local tax dollars as spending for education, public safety, parks, libraries, and other services. Higher pension costs mean less funding to go around or higher taxes.
Despite balanced budget requirements, government officials have been able to keep pension debt mostly off city balance sheets, until last year when a new Governmental Accountability Standards Board requirement, known as GASB 68, required cities and states to report the bulk of their pension obligations for the first time.
The transparency measure led to massive, one-year increases in debt statistics. Truth in Accounting’s home city of Chicago reported a 293 percent, one-year pension-debt increase.
The nonpartisan research group has called for understandable, reliable and transparent financial information from all levels of government, since its founding in 2002.
Across all 20 cities, it calculates almost $263 billion in debt.
