What Cities' Revenue-Raising Methods Say About Their Pension Funding

New research shows places that rely more on property taxes and less on state aid tend to have better-funded retirement systems.
by | April 2, 2019 AT 4:00 AM
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For a range of reasons, some local governments have accumulated massive unfunded pension liabilities over many years. Most often, these shortfalls are attributed to political climates, downturns in the local economy and aging populations.

New research reveals that cities' revenue structures -- the mix of taxes, fees and intergovernmental aid they take in -- also play a critical role, potentially putting some places at greater risk of mounting pension liabilities.

The University of Texas at Dallas study, published in the journal State and Local Government Review, provides one of the first academic analyses of what factors influence pension funding at the local government level. It finds that localities that rely heavily on property taxes tend to contribute more to their pension systems, while those that depend more on state aid for revenue often experience greater pension funding woes.

For years, some state and local governments chronically underfunded their retirement systems, particularly after the Great Recession hit. When governments face deficits, they’ll look to maintain operating budgets as cutting pension funding remains far more politically palatable than eliminating public services.

In times of economic turmoil, some sources of revenue are much more stable than others.

Governments that rely more on property taxes are generally better able to weather fiscal stress and continue to make pension contributions. (Some areas, however, did incur significant declines with the collapse of the housing market just over a decade ago.) Overall, the study reports that every 1 percentage-point increase in reliance on property taxes as a share of own-source revenues corresponds with a $3.22-per-capita drop in unfunded pension liabilities.

More volatile -- and therefore more vulnerable to economic shocks -- revenue sources include sales taxes, income taxes and charges for services. Intergovernmental aid is another a “less predictable” revenue source. According to the study, a 1 percentage-point increase in intergovernmental funds as a share of total revenues correlated with a $3.57-per-capita increase in unfunded liabilities.

"Cities that depend on less-stable revenues and also on state aid may be more focused on maintaining their operating solvency than on funding longer-term obligations," says Evgenia Gorina, the report's author.

To maintain adequate pension funding, the report recommends that cities with less-stable revenues employ stricter pension contribution rules and strengthen their budget stabilization capacity to withstand times of fiscal stress.

The findings are notable given the vast differences in how cities’ budgets are structured. According to the Lincoln Institute of Land Policy's Fiscally Standardized Cities database, which adjusts numbers to account for the budgets of overlapping jurisdictions and differences in services they provide, four cities relied on intergovernmental aid to fund more than 60 percent of their general revenues in 2016: Buffalo, N.Y.; Casper, Wyo.; New Haven, Conn.; and Springfield, Mass.

By contrast, intergovernmental aid accounted for one-fifth or less of revenues in 20 other cities.

 

How Much Does Your City Rely on Intergovernmental Aid?

City % of General Revenues Intergovernmental Revenue Total General Revenue
Warwick, RI 16.5% $61,169,747 $370,156,702
Nashua, NH 37.4% $165,161,385 $441,126,665
Bridgeport, CT 58.0% $533,890,295 $920,634,476
Hartford, CT 57.8% $567,654,786 $981,442,604
Boston, MA 29.2% $1,309,758,805 $4,492,976,517
Springfield, MA 64.8% $517,216,308 $798,414,431
Worcester, MA 47.3% $418,084,743 $883,977,644
Lewiston, ME 46.2% $74,970,672 $162,254,291
New Haven, CT 61.3% $558,068,615 $909,868,444
Aurora, IL 37.2% $346,403,556 $930,064,655
Providence, RI 41.6% $427,425,207 $1,026,834,512
Madison, WI 32.1% $387,674,526 $1,206,939,882
Fairbanks, AK 50.8% $82,913,707 $163,361,231
Manchester, NH 33.0% $162,107,179 $490,758,705
Anchorage, AK 41.3% $724,890,043 $1,757,260,157
Jackson, MS 42.4% $278,385,523 $655,957,468
Portland, ME 21.4% $71,790,617 $335,241,909
Missoula, MT 37.5% $85,686,687 $228,570,543
Rutland, VT 58.6% $48,950,070 $83,489,566
Warren, MI 42.0% $234,242,322 $557,702,497
Greensboro, NC 37.8% $431,293,496 $1,142,461,877
Durham, NC 32.0% $349,284,595 $1,092,168,448
Austin, TX 10.8% $695,049,557 $6,419,449,776
Nampa, ID 38.1% $87,591,219 $230,009,492
Ft. Wayne, IN 41.0% $375,030,601 $915,725,311
Boise, ID 30.5% $221,741,066 $726,304,274
Arlington, TX 29.6% $510,255,010 $1,724,646,233
Ft. Worth, TX 26.6% $1,059,908,379 $3,989,535,552
Salem, OR 46.5% $342,353,409 $736,872,114
Des Moines, IA 37.7% $458,252,245 $1,216,536,105
Columbia, SC 19.4% $133,164,153 $686,394,501
Houston, TX 21.3% $2,559,851,674 $12,038,017,216
Gary, IN 43.6% $143,569,040 $328,927,937
Chesapeake, VA 38.2% $420,010,577 $1,098,473,644
Eugene, OR 23.3% $217,056,817 $933,190,454
Raleigh, NC 31.7% $630,915,620 $1,991,549,737
Lincoln, NE 24.6% $336,548,099 $1,367,906,252
Corpus Christi, TX 24.3% $351,095,962 $1,445,362,090
El Paso, TX 43.0% $1,361,798,292 $3,169,304,434
Billings, MT 29.0% $119,848,842 $412,628,464
Virginia Beach, VA 33.2% $697,243,141 $2,098,582,557
Milwaukee, WI 43.3% $1,422,162,675 $3,286,465,839
San Antonio, TX 24.2% $2,361,029,724 $9,756,407,450
Nashville, TN 17.8% $729,758,428 $4,097,840,708
Frederick, MD 28.0% $133,252,773 $476,651,373
Cedar Rapids, IA 31.9% $192,405,743 $604,057,440
Santa Ana, CA 51.8% $1,045,368,823 $2,016,979,880
Huntington Beach, CA 30.9% $318,186,858 $1,028,830,209
Omaha, NE 22.1% $627,064,224 $2,841,873,672
St. Petersburg, FL 21.7% $254,701,575 $1,173,983,992
Garland, TX 22.9% $364,265,446 $1,588,785,032
Portland, OR 27.2% $1,074,397,546 $3,943,214,364
Topeka, KS 37.5% $197,896,653 $527,627,267
Sioux Falls, SD 28.2% $204,266,133 $725,392,811
Dallas, TX 19.0% $1,428,157,260 $7,535,311,561
Casper, WY 60.9% $216,224,996 $355,098,082
Wichita, KS 43.2% $687,486,673 $1,591,656,446
St. Paul, MN 43.5% $842,299,161 $1,936,921,009
Atlanta, GA 16.9% $587,802,607 $3,479,563,958
Columbus, GA 32.2% $225,146,357 $699,656,932
Baltimore, MD 43.5% $1,658,035,018 $3,814,999,492
San Diego, CA 30.3% $2,750,878,973 $9,073,489,622
Rapid City, SD 18.8% $54,320,754 $288,748,532
Richmond, VA 35.3% $536,458,442 $1,520,061,327
Miami, FL 19.1% $518,308,839 $2,707,730,363
Bakersfield, CA 56.3% $1,386,134,736 $2,462,040,241
Wilmington, DE 31.0% $153,353,448 $494,725,724
Charleston, SC 17.5% $138,533,945 $792,588,029
Aurora, CO 30.5% $555,763,727 $1,819,917,911
Salt Lake City, UT 15.1% $171,403,290 $1,135,543,671
Shreveport, LA 28.8% $282,547,250 $981,807,496
Tucson, AZ 35.0% $788,885,344 $2,253,235,218
Minneapolis, MN 32.4% $909,852,142 $2,805,431,609
Chicago, IL 33.3% $6,548,780,714 $19,654,681,100
Jacksonville, FL 22.7% $1,178,668,604 $5,194,846,063
San Jose, CA 34.7% $2,926,686,116 $8,438,548,783
Memphis, TN 20.6% $973,211,764 $4,719,086,415
Fremont, CA 33.7% $546,761,243 $1,620,551,581
Tampa, FL 41.4% $964,150,503 $2,331,360,728
Hialeah, FL 23.9% $308,594,136 $1,288,527,136
Huntington, WV 32.7% $58,548,938 $179,157,852
Kansas City, KS 36.3% $396,550,940 $1,092,739,967
Reno, NV 41.8% $532,700,297 $1,273,952,121
Knoxville, TN 13.2% $189,655,649 $1,440,200,119
Albuquerque, NM 42.2% $906,547,405 $2,146,751,066
Phoenix, AZ 28.8% $2,247,818,336 $7,796,967,763
Anaheim, CA 32.0% $864,222,745 $2,701,452,374
Lexington, KY 23.8% $261,709,887 $1,097,509,845
Orlando, FL 20.8% $371,158,112 $1,781,304,950
Bismarck, ND 34.3% $105,504,379 $307,236,313
Fargo, ND 37.1% $210,348,919 $567,247,376
Dover, DE 22.5% $43,628,977 $193,923,179
Columbus, OH 31.4% $1,577,838,154 $5,031,011,523
Riverside, CA 46.3% $1,251,673,104 $2,704,333,604
Norfolk, VA 37.5% $525,357,958 $1,400,976,725
Mesa, AZ 30.9% $602,981,373 $1,949,715,633
Louisville, KY 24.8% $687,799,892 $2,770,376,885
Indianapolis, IN 40.4% $2,203,252,676 $5,451,557,749
Fresno, CA 55.8% $1,749,344,564 $3,133,733,736
Tulsa, OK 22.0% $378,771,604 $1,725,141,137
Provo, UT 28.8% $111,645,864 $387,815,462
New York, NY 28.8% $32,574,984,404 $113,230,111,272
Pittsburgh, PA 38.6% $866,674,177 $2,247,572,515
Toledo, OH 39.3% $545,270,515 $1,385,871,077
Yonkers, NY 36.1% $643,806,589 $1,781,274,316
Grand Rapids, MI 40.2% $329,612,928 $820,802,730
Akron, OH 35.8% $368,653,941 $1,028,503,653
Cincinnati, OH 30.4% $658,872,733 $2,165,130,122
Modesto, CA 41.3% $670,825,388 $1,623,931,312
Colorado Springs, CO 26.0% $659,246,835 $2,536,077,635
Los Angeles, CA 35.3% $13,722,301,522 $38,838,949,178
Oklahoma, OK 26.9% $627,374,729 $2,334,342,445
Baton Rouge, LA 22.3% $376,498,822 $1,690,491,900
Spokane, WA 38.0% $421,905,125 $1,109,141,592
Tallahassee, FL 16.8% $181,091,334 $1,075,901,468
San Francisco, CA 24.2% $2,942,958,346 $12,156,895,296
Lubbock, TX 18.3% $317,091,303 $1,732,485,740
Rochester, NY 57.4% $939,545,794 $1,635,715,230
Ft. Lauderdale, FL 15.9% $211,884,795 $1,334,790,707
Oakland, CA 37.6% $1,794,541,022 $4,766,783,627
Stockton, CA 53.9% $1,131,579,719 $2,099,541,470
Las Vegas, NV 37.6% $1,326,433,113 $3,531,758,442
Las Cruces, NM 40.5% $135,869,370 $335,776,879
Tacoma, WA 22.7% $426,223,246 $1,881,606,181
New Orleans, LA 31.7% $761,730,166 $2,405,197,380
Syracuse, NY 59.0% $574,561,824 $973,796,056
Dayton, OH 35.8% $290,489,564 $810,696,229
Long Beach, CA 41.7% $1,746,249,582 $4,189,915,361
Detroit, MI 36.4% $1,581,658,653 $4,342,990,748
Charleston, WV 26.2% $70,405,068 $268,334,206
Chattanooga, TN 16.5% $328,130,717 $1,984,051,512
Sacramento, CA 35.3% $1,496,990,112 $4,242,714,736
Seattle, WA 16.9% $1,052,654,667 $6,235,031,546
Washington, DC 29.1% $3,828,506,939 $13,171,094,502
Burlington, VT 37.7% $117,732,782 $312,229,504
Charlotte, NC 20.1% $1,330,093,719 $6,615,763,309
Cleveland, OH 27.6% $855,566,944 $3,101,872,184
Little Rock, AR 41.0% $375,179,824 $914,657,998
Kansas City, MO 18.7% $512,655,107 $2,748,213,901
St. Louis, MO 22.0% $356,794,822 $1,624,267,489
Denver, CO 16.6% $1,014,363,459 $6,128,393,357
Buffalo, NY 61.1% $1,233,035,736 $2,018,445,331
Birmingham, AL 23.7% $303,362,936 $1,280,808,592
Ft. Smith, AR 47.1% $183,825,769 $390,550,420
Philadelphia, PA 38.2% $4,878,176,816 $12,761,603,043
Mobile, AL 31.4% $269,544,702 $858,325,673
Cheyenne, WY 32.4% $181,543,242 $560,292,316
Gulfport, MS 18.6% $138,030,218 $742,685,438
Montgomery, AL 28.5% $274,587,249 $963,394,668
Flint, MI 36.4% $318,613,174 $874,391,515

SOURCE: Fiscal 2016 data from Lincoln Institute of Land Policy, Fiscally Standardized Cities database

Similar differences are apparent for property tax collections. Many cities, particularly in the Northeast, rely on property taxes for the majority of revenues when intergovernmental funding is excluded. On the high end, they fund 80 percent of own-source revenues in Bridgeport, Conn.; Nashua, R.I.; and Warwick, R.I.

But in 14 other cities, property taxes accounted for less than a quarter of own-source revenues. The share was just 10 percent in Flint, Mich.

 

Reliance on Property Taxes

City Property Tax % Own Source Revenues Property Tax Own Source General Revenue
Warwick, RI 82.0% $229,986,672 $280,451,937
Nashua, NH 80.6% $221,082,493 $274,263,978
Bridgeport, CT 78.3% $301,309,607 $385,040,488
Hartford, CT 77.8% $280,025,480 $360,136,459
Boston, MA 76.5% $2,127,267,173 $2,780,781,295
Springfield, MA 74.2% $187,483,493 $252,633,903
Worcester, MA 73.7% $289,121,036 $392,551,933
Lewiston, ME 72.9% $59,612,087 $81,791,934
New Haven, CT 72.0% $252,876,494 $351,409,286
Aurora, IL 69.2% $370,702,126 $536,034,697
Providence, RI 69.0% $343,996,899 $498,467,187
Madison, WI 67.5% $525,290,033 $777,670,368
Fairbanks, AK 66.4% $53,219,862 $80,113,744
Manchester, NH 65.2% $201,311,537 $308,607,616
Anchorage, AK 64.2% $509,724,027 $794,298,435
Jackson, MS 63.0% $218,904,064 $347,519,593
Portland, ME 63.0% $165,717,142 $263,142,114
Missoula, MT 62.7% $89,172,520 $142,236,527
Rutland, VT 62.3% $15,988,006 $25,665,656
Warren, MI 58.1% $175,550,601 $302,201,798
Greensboro, NC 56.9% $352,207,963 $618,575,086
Durham, NC 56.8% $380,493,011 $670,112,262
Austin, TX 55.0% $2,199,446,240 $3,999,991,754
Nampa, ID 54.9% $73,853,628 $134,546,903
Ft. Wayne, IN 53.9% $265,671,045 $493,160,532
Boise, ID 52.3% $263,266,705 $503,479,968
Arlington, TX 52.1% $597,047,479 $1,146,915,761
Ft. Worth, TX 51.8% $1,382,064,083 $2,669,275,800
Salem, OR 51.6% $185,441,634 $359,227,011
Des Moines, IA 51.1% $358,621,808 $701,292,247
Columbia, SC 50.5% $238,143,137 $471,278,472
Houston, TX 50.0% $4,475,929,088 $8,955,144,602
Gary, IN 49.8% $90,571,605 $181,713,440
Chesapeake, VA 49.7% $313,816,686 $631,349,405
Eugene, OR 49.3% $218,346,312 $443,125,445
Raleigh, NC 49.1% $594,819,589 $1,210,764,940
Lincoln, NE 48.9% $337,322,009 $690,485,590
Corpus Christi, TX 48.8% $455,786,749 $934,220,136
El Paso, TX 48.3% $793,345,768 $1,641,925,625
Billings, MT 47.9% $127,566,825 $266,048,112
Virginia Beach, VA 47.7% $622,381,683 $1,304,097,068
Milwaukee, WI 46.9% $754,720,819 $1,610,099,128
San Antonio, TX 46.6% $2,157,659,289 $4,631,121,092
Nashville, TN 46.4% $947,483,488 $2,041,634,011
Frederick, MD 46.4% $143,272,867 $309,048,863
Cedar Rapids, IA 46.1% $174,192,556 $377,972,243
Santa Ana, CA 45.8% $385,780,005 $841,648,617
Huntington Beach, CA 45.8% $280,106,937 $611,168,943
Omaha, NE 45.8% $616,289,685 $1,345,009,939
St. Petersburg, FL 45.7% $378,580,391 $827,594,759
Garland, TX 45.7% $317,958,711 $695,540,894
Portland, OR 45.7% $1,213,454,174 $2,658,071,356
Topeka, KS 45.2% $135,820,986 $300,239,614
Sioux Falls, SD 45.0% $213,727,304 $474,954,869
Dallas, TX 44.0% $2,589,675,600 $5,883,317,464
Casper, WY 43.9% $55,292,078 $126,085,499
Wichita, KS 43.7% $355,740,649 $813,268,779
St. Paul, MN 43.5% $426,349,106 $979,703,616
Atlanta, GA 43.4% $1,089,115,398 $2,507,810,712
Columbus, GA 43.4% $183,991,705 $423,924,938
Baltimore, MD 43.4% $855,901,297 $1,973,998,960
San Diego, CA 42.5% $2,222,506,339 $5,231,826,634
Rapid City, SD 41.9% $91,987,532 $219,495,196
Richmond, VA 41.6% $321,076,577 $771,084,442
Miami, FL 40.7% $835,722,196 $2,053,416,924
Bakersfield, CA 40.6% $395,282,392 $974,515,060
Wilmington, DE 40.5% $109,685,917 $271,088,699
Charleston, SC 40.4% $215,351,396 $533,520,563
Aurora, CO 40.2% $448,224,900 $1,114,715,995
Salt Lake City, UT 40.2% $352,381,613 $877,386,693
Shreveport, LA 39.9% $260,308,214 $652,023,190
Tucson, AZ 39.8% $480,993,271 $1,208,322,456
Minneapolis, MN 39.4% $718,329,225 $1,821,938,327
Chicago, IL 39.3% $4,395,421,687 $11,186,549,990
Jacksonville, FL 38.9% $941,791,704 $2,423,539,488
San Jose, CA 38.4% $2,043,683,257 $5,315,783,668
Memphis, TN 38.1% $797,181,420 $2,090,685,257
Fremont, CA 37.9% $379,665,720 $1,001,540,467
Tampa, FL 37.7% $472,096,742 $1,252,405,892
Hialeah, FL 36.8% $340,822,779 $925,135,266
Huntington, WV 36.7% $42,613,188 $116,086,327
Kansas City, KS 36.6% $145,499,987 $397,887,421
Reno, NV 36.4% $249,034,243 $684,790,348
Knoxville, TN 35.9% $208,574,373 $581,589,879
Albuquerque, NM 35.8% $388,993,091 $1,087,870,235
Phoenix, AZ 35.7% $1,413,708,653 $3,960,249,075
Anaheim, CA 35.3% $423,934,638 $1,200,738,373
Lexington, KY 35.3% $287,500,290 $814,316,357
Orlando, FL 35.3% $430,696,779 $1,220,854,061
Bismarck, ND 35.2% $64,338,422 $182,841,903
Fargo, ND 35.0% $115,736,801 $330,277,576
Dover, DE 34.6% $22,676,984 $65,486,405
Columbus, OH 34.6% $1,098,851,267 $3,179,651,648
Riverside, CA 34.3% $315,702,898 $919,111,521
Norfolk, VA 34.3% $266,065,087 $774,685,890
Mesa, AZ 34.3% $278,246,762 $810,751,349
Louisville, KY 34.2% $647,878,362 $1,893,715,975
Indianapolis, IN 34.0% $878,969,287 $2,587,705,365
Fresno, CA 33.7% $413,537,470 $1,225,397,058
Tulsa, OK 33.5% $405,861,267 $1,212,053,818
Provo, UT 33.3% $63,754,153 $191,239,487
New York, NY 33.3% $23,257,093,406 $69,793,508,791
Pittsburgh, PA 32.8% $390,327,013 $1,191,123,650
Toledo, OH 32.7% $254,126,275 $777,396,839
Yonkers, NY 32.6% $357,054,481 $1,094,880,462
Grand Rapids, MI 32.6% $145,001,240 $444,935,073
Akron, OH 32.4% $202,037,983 $623,136,982
Cincinnati, OH 32.4% $421,389,611 $1,300,073,875
Modesto, CA 32.4% $153,955,933 $475,438,191
Colorado Springs, CO 32.3% $347,144,645 $1,074,726,510
Los Angeles, CA 32.2% $5,839,813,904 $18,126,969,911
Oklahoma, OK 31.8% $494,120,241 $1,552,071,129
Baton Rouge, LA 31.8% $409,628,825 $1,289,391,149
Spokane, WA 31.5% $197,515,458 $627,500,674
Tallahassee, FL 31.5% $160,556,158 $510,120,987
San Francisco, CA 31.4% $2,424,049,992 $7,723,234,137
Lubbock, TX 30.7% $293,226,027 $954,244,371
Rochester, NY 30.5% $199,307,814 $653,389,385
Ft. Lauderdale, FL 30.3% $292,297,863 $965,681,424
Oakland, CA 30.2% $814,046,076 $2,695,297,022
Stockton, CA 29.9% $268,933,284 $900,596,638
Las Vegas, NV 29.8% $583,726,029 $1,956,950,447
Las Cruces, NM 29.6% $48,434,830 $163,455,464
Tacoma, WA 29.6% $275,003,217 $929,161,714
New Orleans, LA 29.1% $444,582,233 $1,529,977,391
Syracuse, NY 28.3% $106,339,048 $375,949,732
Dayton, OH 28.2% $128,809,488 $456,069,207
Long Beach, CA 28.2% $613,302,238 $2,173,710,094
Detroit, MI 28.2% $601,126,193 $2,133,584,590
Charleston, WV 27.9% $54,202,080 $194,117,020
Chattanooga, TN 27.7% $264,002,104 $951,371,226
Sacramento, CA 26.5% $517,809,947 $1,951,837,710
Seattle, WA 26.4% $1,029,404,305 $3,893,839,336
Washington, DC 26.2% $2,418,903,016 $9,249,379,990
Burlington, VT 25.8% $31,829,561 $123,450,777
Charlotte, NC 25.4% $1,265,395,394 $4,986,656,850
Cleveland, OH 24.9% $429,224,750 $1,727,024,906
Little Rock, AR 24.7% $131,118,537 $531,680,354
Kansas City, MO 24.1% $497,621,051 $2,065,041,332
St. Louis, MO 23.9% $294,808,450 $1,232,191,036
Denver, CO 23.2% $1,110,539,759 $4,788,584,568
Buffalo, NY 23.1% $170,770,666 $739,502,749
Birmingham, AL 23.0% $180,749,729 $787,287,258
Ft. Smith, AR 20.9% $37,344,815 $178,399,997
Philadelphia, PA 19.2% $1,233,996,822 $6,428,254,481
Mobile, AL 18.0% $98,350,898 $546,978,235
Cheyenne, WY 13.7% $48,554,600 $354,789,111
Gulfport, MS 13.1% $78,451,623 $597,491,963
Montgomery, AL 11.0% $75,234,995 $685,568,548
Flint, MI 10.2% $51,890,082 $510,208,975

SOURCE: Fiscal 2016 data from Lincoln Institute of Land Policy, Fiscally Standardized Cities database

These revenue figures might not just indicate how apt cities are to fund their pensions but also how they’ll contend with other mounting liabilities. The study suggests “a buildup of long-term debt and pension debt may go hand in hand,” identifying a positive relationship between long-term debt and pension underfunding. Total revenues weren’t associated with unfunded liabilities.

Gorina’s analysis examined data from 2003 to 2012 for 401 localities with populations of at least 50,000, calculating total aggregate unfunded liabilities per capita for all of each city’s pension plans. Wealthier tax bases and larger concentrations of the age 65 and over population were also correlated with underfunding pensions, while more renter-occupied households were associated with smaller unfunded liabilities.