Prichard, Alabama (pop. 27,000), like most states and cities in the United States, has a defined-benefit pension for public employees. Workers put in 5.5% of their salary and the city put in another 10.5%. But it wasn’t enough: the fund is broke and the town has stopped sending pension checks and is seeking bankruptcy protection.
An excellent New York Times piece today recounts what happened. The state mandated more generous benefits (but didn’t pay for it), employees could retire in their 50s, the city’s population has dropped since the 1970s, and Prichard had struggled to recover from a previous town bankruptcy in 1999. The 150 retirees now get nothing.
A lawyer representing the city, R. Scott Williams, said that the city simply did not have the money. “The reality for Prichard is that if you took money to build the pension up, who’s going to pay the garbage man?” he asked. “Who’s going to pay to run the police department? Who’s going to pay the bill for the street lights? There’s only so much money to go around.”[…]
“Prichard is the future,” said Michael Aguirre, the former San Diego city attorney, who has called for San Diego to declare bankruptcy and restructure its own outsize pension obligations. “We’re all on the same conveyor belt. Prichard is just a little further down the road.”
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