With cities across the United States facing $7 trillion in outstanding public pension liabilities, a first-of-its-kind conference brought together 14 major municipal chief financial officers to discuss how to close these huge funding gaps.
“When I took over as Chicago’s chief financial officer last year, I had to hit the ground running,” said Lois Scott, who helped organized the Municipal CFO Forum, which the City of Chicago, Office of the Mayor and the University of Chicago Harris School of Public Policy Studies hosted on April 12-13.
“My first instinct was to pick up the phone to touch base with my peers, but I quickly realized that no support network existed among municipal CFOs. We wanted to change that and found a natural partner in Chicago Harris, drawing upon its resources and long-term networks to help provide thought-provoking discussions.”
CFOs from cities such as Los Angeles, Houston, Philadelphia and Washington, D.C., participated in the private event. The inaugural forum, slated to occur biannually to tackle a variety of issues, was created to support policy dialogue and create a peer-learning network of CFOs from the 30 largest cities in the United States.
“The financial challenges facing cities have become increasingly difficult during the current economic downturn,” said Colm O’Muircheartaigh, dean of Chicago Harris. “Hosting this event with the City of Chicago gives Chicago Harris a chance to share its academic research resources with municipal decision makers, and to give city CFOs a candid, professional and collegial setting to talk shop.”
A centerpiece of the event was a panel discussion on pensions led by Paula Worthington, senior lecturer at Chicago Harris.
“Every city, of course, is different and has special circumstances, but these cities face many common challenges,” said Worthington. “They all face budget pressure, infrastructure demands, public sector employee demands, legacy costs and residents who want something more/better/different inside their cities. How do you pay for all that without taxing yourself into oblivion?”
Worthington was joined by panelist Joshua D. Rauh, associate professor of finance at Northwestern University’s Kellogg School of Management; Josh B. McGee, vice president for public accountability initiatives at the Laura and John Arnold Foundation; and Amy B. Monahan, associate professor and Opperman Research Fellow at the University of Minnesota Law School.
Discussions ranged from the flaws of the Governmental Accounting Standards Board system, the need to move away from promising benefits toward accrual or savings rates, and the complicated nature of state laws that govern public pensions.
“There is no magic-bullet fix,” said McGee, noting that there are only three options to help correct the underfunded public pensions: raise taxes, reduce services or reduce benefits. “Because this is such a difficult problem, it is going to take real leadership to move the ball forward.”
In addition to the panel discussion, key speakers included Jens Ludwig, the McCormick Foundation Professor of Social Service Administration, Law and Public Policy at UChicago, who discussed the cost of crime on cities; Ajit Kambil, global research director of Deloitte’s CFO Program, who touched on the importance of mayoral-CFO relationships; and Anil K. Kashyap, the Edward Eagle Brown Professor of Economics and Finance at the University of Chicago Booth School of Business, who talked about the lessons of the Euro crisis.
“We want the municipal CFOs to know they are not alone,” Worthington said about the goals of the conference. “They feel alone because they are the CFOs of San Jose, Detroit or Chicago, but they have peers who share their pain and concerns. These forums can connect them with each other to focus on some of their core problems.”
—Prof. Jacqueline Stewart