A vicious cycle: Fiscal intervention, pension underfunding, and instability in (re)making racialized geographies

Abstract

The 2008 financial crisis had profound impacts on government finances across the United States, including a lasting decrease in public pension funding levels. Today state and local governments in the United States have trillions of dollars in unfunded public pension liabilities, and the financial condition of pension systems has material impacts on borrowing costs, service delivery, and taxation, as well as retirement security. Local governments have been tasked with shoring up their pension systems while also grappling with sluggish revenue recovery, a situation that compounds already existing fiscal issues. Building on extant scholarship on crisis, austerity urbanism, and pragmatic municipalism, we examine the practice of “shorting” pension systems among Illinois municipalities and a state law meant to strengthen the fiscal health of local pension systems by curbing that practice. Using the case of the City of Harvey, a suburb of Chicago, we show how municipal finance and seemingly neutral policies aimed at ensuring fiscal health can trigger austerity actions that deepen fiscal stress for racialized communities. By examining Illinois’ pension fund landscape and proposing avenues for further research, we contribute to larger conversations about how governance, property, and pensions are inextricably intertwined with persistent racial inequality.

Fiscal geographies between the crisis and the pandemic

“…To enforce this, they created a mechanism by which intergovernmental transfers could be intercepted and rerouted to underfunded pension systems. Through the case study of Harvey, a lower-income and majority-black suburb, Kass et al (2022) demonstrate that these interceptions have only occurred with a handful of municipalities that are already deeply distressed, highlighting how "fiscal discipline tools can punish already distressed communities of color" (p. 8). This case is important for reinforcing that the fiscal system is not colorblind.…”

“…Kass et al’s (2022) contribution to this themed issue looks at “pension shorting” in Metropolitan Chicago. After the 2008 financial crisis, Illinois mandated that municipalities promptly make required payments into public sector pensions.…”

“…Three of those papers are presented here. Kass et al (2022), Mizes (2021), and Whiteside (2021) critically appraise the ramifications of tax on the restructuring of society, politics, and the state itself. Approaches developed across these three papers invite an intellectual rehabilitation of the positive capacities of states while uncompromisingly drawing attention to where past attempts fall short.…”