WASHINGTON -- More than half of the top 50 local governments ranked by outstanding debt rated by Moody's Investor's Service now have higher pension liabilities than debt, the rating agency said Friday.
According to a report released Friday by Moody's, unfunded pension liabilities for the 50 governments have more than doubled over the last decade; 32 now have higher pension liabilities than debt.
The governments in the report include cities, counties and school districts across the U.S.
The median adjusted net pension liability (ANPL) for the 50 local governments compared to all governmental revenues was 147% for fiscal 2015, a sharp rise from 70% in 2005.
Analysts predict the trend will continue going forward. Due to poor investment performance in 2015 and 2016, unfunded pension liabilities will continue to grow for at least the next two years, Moody's said in the report.
Analysts predicted ANPLs to grow roughly 6% in fiscal 2016 and another 31% in fiscal 2017.
"While pension costs are consuming a greater share of many local government budgets, they are not containing unfunded liability growth," analysts wrote.
Pension contributions totaled $17.6 billion in fiscal 2015 for the 50 largest local governments, a rise from $7.4 billion in 2005. The median of 5.2% of governmental revenues was also an increase from 3.6% in 2005.
Local governments with the highest ANPL as a percentage of operating revenue for fiscal 2015 were: Chicago at 719%; Dallas at 549%; Phoenix at 434%; Houston at 414%; and Los Angeles at 407%, according to the report.
Conversely, the five ranked municipalities with the lowest ANPL as a percentage of operating revenue in fiscal 2015 were: Wake County, N.C. at 22%; Mecklenburg County, N.C. at 25%; Washington D.C. at 28%; Cypress-Fairbanks Independent School District (Tex.) at 52%; and North East Independent School District (Tex.) at 56%.
Analysts also noted that the aggregate ANPL for the top 50 governments was $367 billion in fiscal 2015.
The median pension contributions for the 50 governments was 6% of operating revenues in 2015, while the median for combined fixed costs for pension and other plans plus debt service was 23% of operating revenues in 2015.
Although pension costs are consuming a greater share of many local government budgets, they are not containing unfunded liability growth, Moody's said. They still remain an affordable cost for most municipalities, the agency added.
Friday's report follows an October report from Moody's that said the ANPL of states totaled $1.25 trillion in fiscal 2015, a figure that was expected to grow by $50 billion at the beginning of this fiscal year.
Analysts attributed the growing problem of rising pension liabilities to states' insufficient contributions to pension plans, low interest rates and other factors.
