(The Center Square) – Pension liabilities contributed to poor ratings for Missouri’s largest cities in a report by Truth in Accounting, a nonprofit organization devoted to examining the fiscal health of governments.
Both cities received “D” grades. Kansas City was rated 62nd out of 75 cities and St. Louis 64th. The report gave 22 cities (29%) “D” grades as the taxpayer burden was between $5,000 and $20,000.
The methodology is to examine the cities’ bills, their respective number of taxpayers and determine if there is burden or surplus for each. Grades of “A” or “B” are given to governments making their balanced budget requirements; “C” for passing if it comes close; and “D” and “F” when it is not balanced and there are significant taxpayer burdens.
The organization recommends pension plans be overfunded during market upturns so the plans can weather downturns in the market.
“Unfortunately, elected officials may see temporary, unrealized, overfunded status as an opportunity to reduce pension contributions and/or increase benefits,” the report said.
Kansas City’s financial condition declined by $84.2 million, according to the report. It resulted in a burden of $9,000 per taxpayer. It had 76 cents for every dollar of promised pension benefits and no money reserved for promised retiree health care benefits.
“It is important to note that continued market fluctuations, changing investment values, decreased COVID relief funds, and a stabilizing economy that may slow tax collections, could worsen Kansas City’s financial health further,” the report said.
St. Louis had an $11,000 burden per taxpayer. The report said the city’s improvement from last year’s ranking of 69th “is deceiving because the city used outdated pension data.” The city has 87 cents for every dollar of pension benefits and no funds for retiree health care benefits.
“The pension debt included in this report and the city’s financial report is based using 2021 data when pension investments were performing well,” the report said. “If the city’s pension investments experienced the same major decrease that most other cities experienced in 2022, St. Louis’ pension debt would be higher.
Washington, D.C., was the top-rated city and the only city with an “A” rating and a surplus of $10,700 per taxpayer. New York City was rated 75th with a burden of $61,800 per taxpayer as its financial condition declined by $6.1 billion in 2022.
Truth In Accounting said all 75 cities rated have balanced budget policies to “avert future financial difficulties and enhance accountability.” The requirements are “meant to prevent elected officials from shifting the burden of paying for current-year services onto future-year taxpayers and avoid accumulating unsustainable debt.”
