Pension liabilities for 31 of the 50 largest local government entities increased in 2013 according to a newly released annual report on the sector by Moody’s.
Combined, the 50 pensions’ aggregate liabilities increased 14 percent in fiscal year 2013, from $320 billion to $365 billion.
The largest local governments are defined by their total outstanding debt. Los Angeles’ pension liabilities increased $13 billion over the year, to reach $32.3 billion, the largest year-over-year increase, which was driven by a 154 decrease its discount rate, according to Moody’s report. Decreasing discount rates increase the cost of projected pension liabilities.
Notwithstanding Los Angeles’ woes—Moody’s rates the city’s debt at Aa2-Stable—the report hardly depicts a doomsday scenario, at least for some of the largest local pensions.
“Pension costs are not a substantial burden for a significant portion of the largest local governments,” write Moody’s analysts. “Actuarial costs (for pensions) amounted to less than 5 percent of revenues for 14 out of the 50 largest.”
When measuring pension liabilities to city revenues—one measure for assessing funding strength—the City of Houston experienced the highest jump in future obligations. That city now has pension obligations that are 458 percent of revenues, up from 312 percent the previous year.
Despite the overall modest increase in liabilities for the to 50 localities, pension obligations remain an onerous burden for the worst-funded municipalities.
The city of Philadelphia increased its annual pension contribution to 18 percent of all revenue it took in, up from 13 percent the previous year
Chicago contributed just under 10 percent of revenue. It would have had to contribute about 37 percent of revenues to bring that city’s mounting pension liabilities in balance for the year, according to Moody’s. Chicago’s 2013 pension liabilities were projected to be 703 percent of the city’s revenues.
Cook Country contributed just over 5 percent of revenues, well short of the 20 percent it would have needed to contribute to keep pace with its liabilities. Its total liabilities are 346 percent of revenues.
On the positive end of the spectrum, several pensions had liabilities relative to revenues below 100 percent.
Washington D.C.’s liabilities are 24 percent of its revenues, the healthiest of the 50 pension funds by that metric.