At Governing’s Summit on the Cost of Government last September, I asked a group of city, county and state chief financial officers what they saw as the biggest challenge facing their governments. Every member of the group said it was public pensions. I have a great deal of respect for these individuals. They are dedicated public servants, and many of them are far more knowledgeable about state and local government finance than I am. But I think they’re wrong. I think the No. 1 challenge facing state and local governments is infrastructure, not pensions.
First, the dollar estimates for the infrastructure deficit are simply larger than those for pensions. Don Boyd and Peter Kiernan, in a January 2014 paper, pegged the underfunding of state and local government defined-benefit pension systems at $2 trillion to $3 trillion. That’s a lot of money for sure, but the American Society of Civil Engineers estimated the country’s infrastructure deficit at $3.6 trillion, and that was back in 2013.