Dallas could be the next major American city to follow Detroit into the throes of bankruptcy, warns Eric Boehm. Dallas Mayor Michael S. Rawlings said in November that he believes the city is “walking into the fan blades,” in large part because of unsustainable pension promises made to the city’s police officers and firefighters. The fund that is supposed to pay for retired cops and firemen is more than $5 billion in the red, and estimated to be out of money within 20 years.
Municipal bankruptcies, though rare, are bound to happen from time to time, writes Boehm. But they are not supposed to happen in places like Dallas, where the population and the economy are both growing. If poorly designed pension plans are capable of wrecking an otherwise thriving city, it’s time to revise our view of what places are exposed to these risks.
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