When is a Crisis a Crisis? An Examination of Pension Underfunding and State Intervention in Suburban Communities

Authors: Amanda Kass*, University of Illinois At Chicago, Andy Crosby, Pace University
Topics: Economic Geography
Keywords: public pensions, fiscal crisis
Session Type: Paper
Day: 4/6/2019
Start / End Time: 8:00 AM / 9:40 AM
Room: Capitol Room, Omni, East
Presentation File: No File Uploaded

A decade after the Great Recession, unfunded public pension liabilities represent a growing crisis. Governments’ required contributions increase as the financial conditions of pension funds deteriorates, forcing municipalities into uncomfortable choices when they can least afford them.

In 2016, a new law allowed the Illinois Comptroller to intercept state revenue payments to municipalities if they fail to meet police and fire pension fund obligations. This action was first taken in Harvey, a community south of Chicago that is emblematic of the suburbanization of poverty. The law is intended to impose fiscal discipline on municipalities, but Harvey lacks the capacity to fund its pensions while maintaining services. While Harvey’s financial plight has been well documented and predates this latest action, it has largely has been left to tackle its fiscal issues on its own. This abandonment has contributed to a structural fiscal spiral, and, yet, Harvey is often tokenized as an example of corruption and fiscal mismanagement.

Harvey, however, is hardly unique in underfunding its pensions: early analysis indicates that dozens of municipalities may have similarly underfunded their pensions. Yet, few places have had state revenue intercepted. An open question is whether the different treatment of Harvey, as well as the focus on personalities and cultures over structural forces, is a reflection of its status as a majority-Black suburb. This research uses data for 336 Illinois municipalities to explore their fiscal dynamics, and uses this case to probe how the treatment and perception of fiscal crises intersects with processes of racialization.

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