State and Local Retirement Plans in the United States

State and Local Retirement Plans in the United States

Robert L. Clark, Lee A. Craig and John Sabelhaus

State and Local Retirement Plans in the United States explains how economic and political events have shaped the development of pension plans in the last century, and it argues that changes in the structure and generosity of these plans will continue to shape policy and funding in the future. It also brings to bear a new rationale to the policies behind public sector pension plans. The authors use the history of how early public pension plans were established, how they matured and how they have grown in generosity to analyse what changes may be expected in years to come. Unique in its scope, this comprehensive history of the development of public sector pension plans in the United States during the twentieth century expands upon current ideas relating to the changing economic environment, the passage and evolution of social security, and the expansion of the public sector.

Chapter 7: Maturing Local Pension Plans: 1975–2000

Robert L. Clark, Lee A. Craig and John Sabelhaus

Subjects: economics and finance, public sector economics, social policy and sociology, ageing


By the first decades of the twentieth century, all of the largest cities in the country had a plan for some combination of their police officers, firefighters and teachers. In addition, dozens, if not hundreds, of other slightly smaller cities had similar plans for their police officers, firefighters and/or teachers. Many of these plans are still in existence today. Indeed, the first such municipal plan, the New York City Police Pension Fund, is still in operation with 37,000 employees in the plan (US Department of Commerce, Bureau of the Census, 2002, p. 46). In fact, the number of plans in existence has continued to grow. There are now roughly 2,500 individual local pension plans in the United States covering two million municipal, county, township, school district and special district employees. While that might seem like a large number of plans, the figure actually reflects a considerable amount of consolidation. Consider that there are 87,500 local political units in the United States.1 In other words, there is one pension plan for every 35 political units. So while the total number of pension plans has continued to grow over time, at an average annual compounded rate of roughly 5 percent since the creation of the New York City Police Pension Fund in the 1850s, plans have also been consolidating over time. Partly, this reflects consolidation of the political units themselves, as there are roughly half as many political units today as there were in 1940. This consolidation has largely...

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