With the first of the Baby Boom generation having reached the traditional retirement age of sixty-five in 2011, the number of retirement age individuals is expected to grow by 10,000 each day for the next fifteen years.
By 2030, when the last of the Baby Boomers will have turned sixty-five, an estimated 18% of the US population, or sixty-five million Americans, will have reached retirement age.
Up In Smoke provides a startling examination of the status of each of our nation’s retirement systems and explores how a pending retirement crisis could threaten the US economy. Those nearing retirement, as well as generations to follow will increasingly be seeking an understanding of how we arrived at this difficult place and what hope lies ahead. Up In Smoke provides those insights.
Richard DeProspo is an investment professional with over 30 years’ experience advising state and local governments throughout the country. An expert on public employee pension management, he has lectured widely on the topic and advised numerous municipalities and public pension funds on the proper management of employee retirement liabilities.
Mr. DeProspo holds B. A. and M.B.A. degrees from the State University of New York. Up In Smoke in his first non-fiction work.
Beneath the headlines of growing economic crises in Greece and Puerto Rico, the finances of many US cities and states are increasing showing signs of distress. Quietly, below the radar and at a surprisingly swift pace, unfunded public employee pension liabilities have grown to unsustainable levels for many US local governments. The recent bankruptcies of Detroit, Stockton and San Bernardino may soon be followed by those of even larger cities and states, producing troubling outcomes for residents and taxpayers.
Up in Smoke
Referring to the city of Philadelphia’s pension as the “Blob” from the 1958 horror film, the city’s Finance Director pointed out that the city now spends 16% of its general fund budget on pensions, an increase from 6% ten years ago. The fifth largest city in America, Philadelphia spent $648 million in fiscal year 2014 on pension funding, $60 million more than it spent on its police force. Despite these sizeable contributions, the city’s employee retirement system remains only 47% funded, amongst the lowest of any major city in the US. Despite its recent contributions to the city’s retirement systems, Philadelphia’s public employee pension system is more than $40 billion underwater.
In his 2015 budget address, Lancaster, Pennsylvania City Mayor Rick Gray readily attributed his city’s proposed 7.5% tax hike to state mandated increases in public employee pension funding. This increase follows an increase in property taxes of 8.3% in 2013. In his prepared budget remarks, Mayor Gray reported to the Lancaster City Council, “If our pension obligations were the same in 2015 as they were when I first took office in 2006, I would be presenting you with a budget that cut property taxes by nearly 20 percent”