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.