Excerpts from Steve Malanga's article "The Compensation Monster Devouring Cities" in City Journal:
Some cities face crises because, as their populations shrank, their officials failed to downsize the government workforce. Detroit, a city of 1.9 million in the 1950s, registered only 713,777 residents in the 2010 census. But the city and its school system eliminated jobs only slowly over the decades of population implosion, leaving Detroit with crippling legacy expenditures. The city currently has nearly 13,000 employees but is providing pension benefits to 22,000 retirees, a jaw-dropping ratio of retirees to current workers. The annual pension bill for the city’s retired police officers and firefighters alone is $150 million — as much as it costs to pay the salaries of 65 percent of the police and fire departments’ active workers.
. . .
In Detroit recently, an arbitrator working under the state’s new fiscal-emergency legislation took the unprecedented step of ruling that the city could reduce future pension benefits for some current workers. Without the reduction, Mayor Bing estimated, pension and health benefits would consume half of the city’s general fund by 2015.
Illustration by Sean Delonas
Steven Malanga is the senior editor of City Journal and a senior fellow at the Manhattan Institute. He is the author of Shakedown: The Continuing Conspiracy Against the American Taxpayer.