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Cities Chart Course Through Pension Morass

ABCNews.com | by David Klepper | January 3, 2013

In Philadelphia, pension costs doubled in a single decade. Cities in Rhode Island dimmed streetlights, raised taxes and put off road repairs. Stockton, Calif., fell into bankruptcy.

Unpaid bills from decades of retirement promises made to public workers, combined with a lackluster economy and steep Wall Street losses, have built up a financial mountain that threatens to overwhelm budgets and operations in cities and counties across the country.

While it hasn't gotten the attention of the "fiscal cliff" in Washington, the pension crisis at City Hall could have similar effects as mayors are forced to raise taxes, cut government services or renege on retirement promises made to police officers, firefighters, teachers and other public workers.

"It's not about assigning blame, because look, these numbers are staring us in the face," said Allan Fung, the mayor of Cranston, R.I., where the pension fund is only 16 percent funded and the city needs $270 million to meet its pension obligations. "It's a dire situation for us and for many cities and towns around the country. It's a recipe for disaster at the worst economic time possible."

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