Governing Magazine interviewed Michael Pagano, GCI fellow and dean of the College of Urban Planning and Public Affairs, about cities’ recovery from the last recession and the fiscal problems that still remain. Pagano said that without action on taxes, infrastructure and pensions, cities won’t be able to withstand the next recession any better than the last one.
“Cities are disinvesting — you’re not even maintaining the value of the infrastructure you have,” says Michael Pagano, dean of the College of Urban Planning and Public Affairs at the University of Illinois at Chicago and co-author of NLC’s City Fiscal Conditions report since 1991. “We’ve postponed repair and maintenance for so long that we’ve now got to decide what to address, what to abandon and what to sell off.” Public-private partnerships are one way to help finance projects, and cities are increasingly utilizing them as an important tool. But many of cities’ most pressing infrastructure needs — alleys, sidewalks, school facilities and bridge maintenance — might not be attractive to corporate partners.
If infrastructure is one looming crisis for localities, the other is certainly pensions. While a few cities have initiated some retirement benefit reforms in the past five years — around 20 percent of localities, according to NLC — pensions remain a major fiscal problem for municipalities. Pension burdens increased for 31 of the 50 largest local governments in fiscal 2013, the most recent year for which data is available, according to a recent Moody’s report. And in general, required pension contributions are growing faster — in some cases much faster — than local government revenues. As aging public employees retire in the next decade, those pension obligations will continue to gobble up an increasing share of city expenditures, crowding out spending on other services.