in Houston, Texas
Fort Worth could run out of money for pensions in 2023, city on top 10-list based on predicted insolvency
Wednesday, Oct 13, 2010, 03:55PM CST
By Steve Miller
nest eggsPublic employees' nest eggs are running low.

Not to have national news envy, but we can’t help but notice that Fort Worth landed on a list of municipalities and counties that can pay for promised pensions only through 2025 at the latest.

story in today’s Wall Street Journal cites the study by the Kellogg School of Management at Northwestern University.

 

The press release for the study gives us this troubling prediction:

According to [author Joshua Rauh], it is clear that state and local governments in the U.S. are not far from the point where these pension promises will impact their ability to operate. Once the funds themselves are liquidated, the extent to which promised pension payments are competing with other local resources will skyrocket, eroding a large portion of many municipal budgets.”

Fort Worth is #10 in the nation of cities with the shortest solvency horizons for municipal pension systems, according to Rauh's survey, and is projected to be able to cover its current pension bills with current assets, based on 8 percent investment returns, through 2023.

 

But even that projection may be too optimistic. The 8 percent assumption is hardly sound and can cause further fiscal distress, Frederick Rowe, the former chairman of the Texas Pension Review Board, suggests in a September interview with Bloomberg News:

“We have in this country $15 trillion in retirement savings. And if you think that money should compound at eight percent like everyone assumes, in 30 years that turns into $150 trillion. But if it compounds at five percent, three percent less, it turns into $60 trillion. So there is a $90 trillion difference represented by a three percent change in assumptions.”

Another recent study, The Impact of Public Pensions on State and Local Budgets, made similarly dark pronouncements on the legacy of lucrative pensions.

 

This recent story in the Fort Worth Star-Telegram explains part of what ails the city, where employees get a promise of lifetime pension:

"In Fort Worth, for instance, city employees are guaranteed a pension for life, based on their salary, their contributions to the plan and their years of service. The pension plan concerns some city leaders because it is now expected to spend about $430 million more than it takes in over the next 30 years.

 

"State law prevents the city from reducing benefits that retirees or employees have earned, but the City Council is considering changing the plan to limit benefits for any hires after 2011."

And the story outlines some of the salaries paid to Fort Worth's top officials. It’s all pretty geeky stuff, we’ll grant you that. But when folks in Fort Worth wonder why that 3-foot deep pothole isn’t getting fixed, check out the 65-year-old former government worker delivering his Land Rover to the valet at Del Frisco’s.

 

Contact Steve Miller at 832-303-9420 or stevemiller@texaswatchdog.org.

Photo of bird eggs by flickr user dasroofless, used via a Creative Commons license.

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