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Do municipal pensions matter? A review of pensions’ impact on US local governments

In: Research Handbook on City and Municipal Finance

Author

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  • Gang Chen

Abstract

Municipal pension plans are important for local governments because the annual pension costs account for a significant portion of a local government’s budget. The increase in pension contributions could crowd out other spending, while insufficient contributions could lead to solvency risk and negatively affect the government’s credit rating. Municipal pensions also provide stable income to public employees when they retire and could serve as an effective tool to recruit and retain quality employees. This chapter summarizes the impact of municipal pensions on local government’s budgets, fiscal risks, credit ratings, their employees, and possible reform options. The impact of the COVID-19 pandemic on municipal pensions is also discussed. Based on a comprehensive review of the current literature, several lessons to learn and directions for future research are offered.

Suggested Citation

  • Gang Chen, 2023. "Do municipal pensions matter? A review of pensions’ impact on US local governments," Chapters, in: Research Handbook on City and Municipal Finance, chapter 19, pages 352-368, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:20063_19
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    File URL: https://www.elgaronline.com/doi/10.4337/9781800372962.00027
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