Analysis: Beefing up SJ City pensions a long-term disservice to Labor
UC Berkeley public policy prof Sarah Anzia points out in Urban Affairs Review that when local gov'ts increase pension expenses, they more often slash jobs than hike taxes. So besides racking up billions of dollars in debt, cities like SJ are also harming—by over-trimming—public sector workforces in the long run.
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....
The political and institutional constraints local policy makers face are clearly an important part of the story. For example, raising revenue and reducing pension benefits are both politically and legally difficult. It makes sense, moreover, that the states with restrictive TELs are the ones with the strongest relationship between rising local pension costs and reductions in employment.
But other aspects of the politics of pensions are more counterintuitive— and cut across standard ideological and partisan lines. One might think more Democratic, liberal cities and counties would be more likely to respond to pension expenditure increases by increasing revenue and staving off employment reductions. But they are not. Also, debates about public pensions are often framed as pitting pro-employee, pro-pension interests against antipension, anti-public-worker interests, but my findings here suggest that that’s an overly simplistic characterization. From one perspective, public-sector unions have incentives to advocate for better benefits and lower employee contributions, because that is in their members’ interests (Anzia and Moe 2015; DiSalvo 2015). In the longer run, however, absent greater revenue, local governments’ payments for those benefits can limit their ability to grow or even maintain employment—or to increase salaries—which isn’t good for public employees or their unions (Anzia and Moe 2019). One takeaway from my study is that as local governments spend more on pensions, in some cases they have fewer jobs to offer.
This article originally appeared in Urban Affairs Review. Read the whole thing here.
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