Government Reform Archives

Report: Cities have $1.4 trillion in debt

Mariana Trujillo — Mon, 17 Nov 2025 05:06:00 +0000

Nationally, cities report $1.4 trillion in debt, equivalent to approximately $7,000 per capita, according to Reason Foundation’s State and Local Government Finance Report.

The cities of New York, Chicago, Los Angeles, the city and county of San Francisco*, and Houston report the most total liabilities.

The $1.4 trillion in debt carried by cities, towns, and other incorporated municipalities represents 23% of total state and local government debt found in the State and Local Government Finance Report, which can be explored interactively in Reason Foundation’s GovFinance Dashboard.

In per capita terms for cities with 10,000 residents or more, the city and county of San Francisco* ranks first, with total liabilities representing about $43,000 per resident. The rest of the top five cities in per capita debt are Nantucket (MA), New York, Ocean City (NJ), and Miami Beach.

Total debt, reported as “total liabilities,” includes money a city owes in the near term, such as unpaid bills and accrued payroll, as well as long-term obligations, including bonds, pensions, and retiree healthcare.

Reason Foundation extracted this data from publicly available, audited financial reports filed by each county for their fiscal year 2023. While the dashboard covers 90% of the U.S. population living in an incorporated city, this analysis displays the top 50 cities in each category, among cities with 10,000 residents or more.

* Several jurisdictions in the United States operate under consolidated city–county governments, meaning their financial data reflect both city and county functions. Due to their structure and financial reporting practices, these entities could be considered either a city or a county, and therefore, are listed in both the city and county rankings of this report, which can make some comparisons to other cities or counties difficult. Some of the entities most impacted in the rankings and figures are San Francisco, Denver, Honolulu, Nashville, New Orleans, New York and Philadelphia.

The combined entities in the report include the city and borough of Juneau (AK), city and borough of Sitka (AK), city and borough of Wrangell (AK), city and county of San Francisco (CA), city and county of Broomfield (CO), city and county of Denver (CO), Jacksonville (FL), Athens–Clarke County (GA), Columbus–Muscogee County (GA), Georgetown–Quitman County (GA), Macon–Bibb County (GA), city and county of Honolulu (HI), Greeley County (KS), Wyandotte County (KS), Lexington–Fayette Urban County (KY), Louisville/Jefferson County Metro Government (KY), New Orleans (LA), Anaconda–Deer Lodge County (MT), Butte–Silver Bow County (MT), Philadelphia (PA), Lynchburg–Moore County Metropolitan Government (TN), and Nashville–Davidson County (TN). In our aggregate figures, these entities are added to the “county total.”

The five New York City counties—Bronx, Kings, New York, Queens, and Richmond—are consolidated in a single city government and financial report and are listed collectively as New York City in this report.

Baltimore (MD), St. Louis (MO), Chesapeake (VA), Norfolk (VA), Virginia Beach (VA), Baton Rouge (LA), and the District of Columbia (DC) are independent city governments. They have no overlapping county, and perform both municipal and county functions—or in the case of Baton Rouge, the county government falls under the umbrella of the city. In our aggregate figures, these entities are added to the “municipal total.” For more details, please see the report’s about page.

City governments’ long-term debt

About 85% of city debt is long-term—that is, due in more than one year. This category consists of bonds, loans, and notes (50%), unfunded pension liabilities (25%), unfunded retiree health care (18%), and accrued leave payouts (2%).

Cities collectively report $1.2 trillion in long-term debt, or about $6,000 per capita nationally.

New York, Chicago, Los Angeles, the city and county of San Francisco, and Houston declared the most total long-term debt.

For cities with 10,000 residents or more, the city and county of San Francisco ranks first in per capita long-term debt, at $36,602 per resident, followed by Ocean City (NJ), Nantucket (MA), New York City, and Miami Beach.

City government pension debt

Unfunded pension liabilities arise when governments set aside fewer assets than required to fulfill the retirement benefits promised to its public employees–declared as net pension liability.

Cities collectively report nearly $300 billion in unfunded pension obligations, equal to 25% of their long-term debt and equivalent to about $1,500 per capita nationally.

For cities with 10,000 residents or more, New York City has the most total public pension debt at $40 billion, followed by Chicago, Los Angeles, Phoenix, and Philadelphia.

In per capita terms, the city of Chicago ranks first, with its pension debt representing about $13,500 per resident. Beverly Hills, Miami Beach, Riverdale (IL), and Forest Park (IL) follow.

City government OPEB debt

Other post-employment benefits (OPEB) are mostly retiree health care for public employees. OPEB debt arises when governments promise these benefits but do not set aside enough money in advance to cover the future costs, which are declared as net OPEB liability.

Cities collectively report $215 billion in OPEB debt, equal to 18% of their long-term debt, equivalent to roughly $1,100 per capita nationally.

The city New York has the most total pension debt at $95 billion, followed by city and county of San Francisco, Austin, Yonkers (NY), and Boston.

In per capita terms, among cities with 10,000 residents or more, the city of Yonkers (NY) ranks first, with its OPEB debt representing about $12,100 per resident. Waltham (MA), New York, Hoboken (NJ), and Plattsburgh (NY) follow.

City governments’ outstanding bonded debt

Bonds, loans, and notes represent the portion of a city’s long-term liabilities explicitly borrowed in credit markets. Unlike pensions or OPEB, which accumulate as estimated unfunded promises, these instruments are contractual debt obligations with fixed repayment schedules.

Nationally, cities report $608 billion in outstanding bonds, loans, and notes—50% of all long-term liabilities. This equals about $3,000 per capita.

New York City has the most total bonded debt at $105 billion, followed by Los Angeles, Chicago, the city and county of San Francisco, and Houston.

In per capita terms, the city and county of San Francisco (CA) ranks first, with its bonded debt representing about $27,900 per resident. Celina (TX), Salt Lake City (UT), Nantucket (MA), and Washington (DC) follow.

Reason Foundation’s State and Local Government Finance Report totals the liabilities of each state government, as well as the cities, towns, counties, and school districts within each state. This report covers all 50 state governments, over 2,000 county governments, 8,000 municipal governments, and 10,000 school districts, which serve 331 million Americans nationwide.

All figures in the State and Local Government Finance Report are sourced from the financial reports of state and local governments, most often their annual comprehensive financial reports. The data is from the 2023 fiscal year, the most recent year for which complete data are available. Nevada and a handful of cities and counties across the country have not reported 2023 data. Our database lists the available 2023 fiscal year data for each city.

Despite a thorough review, data collection at this scale can result in discrepancies. Please alert us if you identify any errors.

For personalized reports on municipal entities or more detailed information on assets, liquidity, and solvency, please visit the GovFinance Dashboard.

If you have any questions or would like to discuss this data more, please email Mariana Trujillo at mariana.trujillo@reason.org or Jordan Campbell at jordan.campbell@reason.org.

Report: State and local governments have $6.1 trillion in debt

Report ranks every state’s total debt, from California’s $497 billion to South Dakota’s $2 billion

The post Report: Cities have $1.4 trillion in debt appeared first on Reason Foundation.

Report: County governments have $757 billion in debt

Mariana Trujillo — Mon, 17 Nov 2025 05:05:00 +0000

County governments had $757 billion in debt at the end of 2023, equivalent to approximately $2,600 per capita nationwide, according to Reason Foundation’s State and Local Government Finance Report.

Los Angeles County has the most debt of any county government: $62.36 billion.

The combined city and county of San Francisco and Miami-Dade County each had more than $30 billion in debt at the end of 2023. Cook County and the combined city and county of Philadelphia were next, with over $20 billion in debt.

The rest of the 10 most-indebted counties at the end of 2023 were Washington, D.C. ($19.83 billion), the combined city and county of Denver* ($14.3 billion), Nassau County ($14.2 billion), Santa Clara County ($13.4 billion), and the combined city and county of Honolulu* ($12 billion).

This analysis is part of Reason Foundation’s State and Local Government Finance Report, which can be explored interactively in the GovFinance Dashboard. Reason Foundation extracted this data from publicly available, audited financial reports filed by each county for their fiscal year 2023.

Total debt, reported as total liabilities, includes money a county government owes in the near term, such as unpaid bills and accrued payroll, as well as long-term obligations, including bonds, public pension benefits, and retiree health care benefits.

In per capita terms, North Slope Borough, Alaska, ranks first, with its total debt representing $46,883 per county resident.

For counties with 10,000 residents or more, the combined city and county of San Francisco, Washington, DC, the combined city and county of Denver, and Baltimore have the next highest per capita debt levels.

At $12,880 per person, Los Alamos County, New Mexico, has the sixth most per capita county debt.

For counties with 10,000 residents or more, a total of 43 counties reported at least $7,000 in per capita debt, including 21 counties with more than $10,000 in per capita debt.

The five New York City counties—Bronx, Kings, New York, Queens, and Richmond—are consolidated in a single city government and financial report and are listed collectively as the city of New York (NY) in this report.

Baltimore (MD), St. Louis (MO), Chesapeake (VA), Norfolk (VA), Virginia Beach (VA), Baton Rouge (LA), and the District of Columbia (DC) are independent city governments. They have no overlapping county, and perform both municipal and county functions—or in the case of Baton Rouge the county government falls under the umbrella of the city. In our aggregate figures, these entities are added to the “municipal total.” For more details, please see the report’s about page.

Long-term debt

About 80% of county debt is long-term debt, which is due in more than one year. Long-term debt consists of bonds, loans, and notes (44%), unfunded pension liabilities (29%), unfunded retiree health care (17%), and accrued leave payouts (3%).

Counties collectively report $624 billion in long-term debt, or $2,200 per capita nationally.

Los Angeles County has the most long-term liabilities at $52 billion, followed by the combined city and county of San Francisco, Miami-Dade County, Cook County, and the combined city and county of Philadelphia.

In per capita terms, for counties with 10,000 residents or more, the city and county of San Francisco has the most long-term liabilities, representing $46,883 per resident. North Slope Borough, Alaska, was second, with more than $35,000 in long-term debt per resident, followed by Washington, D.C., with over $23,000 per capita.

The combined city and county of Denver, Baltimore, Los Alamos County (NM), the combined city and county of Honolulu, Cape May County (NJ), Inyo County (CA), the combined city of Nashville-Davidson County (TN), and Miami-Dade County also had long-term liabilities exceeding $10,000 per capita.

County pension debt

Unfunded pension liabilities arise when governments set aside fewer assets than required to fulfill the retirement benefits promised to their public employees, which are declared as net pension liabilities.

At the end of 2023, counties collectively reported $181 billion in unfunded pension obligations, which represent 30% of their long-term debt. On a per capita basis, this county pension debt amounts to about $600 per person nationally.

Los Angeles County has the most public pension debt at $13.2 billion, followed by Cook County, Santa Clara County, San Diego County, and the combined city and county of Philadelphia.

In per capita terms, for counties with 10,000 residents or more, North Slope Borough, Alaska, ranks highest in the nation, with its public pension debt representing $12,318 per county resident, followed by Los Alamos County ($6,057 per capita), Mono County ($5,111), Juneau City and Borough ($4,386), Inyo County ($4,363) and Colusa County ($4,220).

Outstanding bonded debt

Bonds, loans, and notes represent the portion of a state government’s long-term liabilities that are explicitly borrowed in credit markets. Unlike public pension benefits or OPEB, which accumulate as estimated unfunded promises, these instruments are contractual debt obligations with fixed repayment schedules.

Nationally, counties report $275 billion in outstanding bonds, loans, and notes, which represent 44% of their long-term debt. On a per capita basis, this equals $956 per capita nationally.

The city and county of San Francisco has the most total bonded debt at $23.5 billion, followed by Miami-Dade County ($19.5 billion), Washington, DC ($12.6 billion), city and county of Denver ($9.9 billion, and city and county Honolulu ($7.1 billion).

In per capita terms, San Francisco ranks first, with its bonded debt representing $26,892 per resident. North Slope Borough, Washington, DC, Denver, and Arlington County (VA) were the next highest.

Despite a thorough review, data collection at this scale can result in discrepancies. Please alert us if you identify any errors.

For personalized reports on municipal entities or more detailed information on assets, liquidity, and solvency, please visit the GovFinance Dashboard.

If you have any questions or would like to discuss this data more, please email Mariana Trujillo at mariana.trujillo@reason.org or Jordan Campbell at jordan.campbell@reason.org.

Report: State and local governments have $6.1 trillion in debt

Report ranks every state’s total debt, from California’s $497 billion to South Dakota’s $2 billion

The post Report: County governments have $757 billion in debt appeared first on Reason Foundation.

California’s AI law works by staying narrow

Nicole Shekhovtsova — Mon, 03 Nov 2025 19:49:33 +0000

California Gov. Gavin Newsom signed the Transparency in Frontier Artificial Intelligence Act into law in late September. The law takes a narrow, transparency-first approach to regulating advanced “frontier” artificial intelligence (AI) models, creating room for experimentation and innovation, while requiring timely disclosures that give the state the data it needs to address risks as they emerge.

This new law is already a better first step than last year’s heavy-handed—and ultimately vetoed—proposal, Senate Bill 1047. The value of the new law, Senate Bill 53, however, will depend on its execution and whether California continues to update its definition of “frontier” to reflect the growing capabilities of firms entering the market.

Senate Bill 53 defines “frontier foundation models” as models trained with more than 10^26, or 10 to the power of 26, floating-point operations (FLOPs)—a.k.a. massive computing power—and imposes heavier obligations on larger firms with more than $500 million in annual revenue.

Among the major provisions of the law, it requires large AI developers to publish a framework explaining their safety standards and risk assessment procedures. Before deployment, a developer must also post a public transparency report, including an additional requirement for large developers to disclose risk assessments and the extent to which third-party evaluators were involved in assessing those risks. Developers are required to report critical safety incidents to the state’s Office of Emergency Services (OES), and starting from 2027, the OES will release anonymized summaries of those reports.

By choosing disclosure and incident reporting rather than rigid technical requirements or pre-deployment approvals, SB 53 leaves space for experimentation—building rules around demonstrated risks instead of hypothetical harms. California’s law also aligns with existing national and international safety standards, rather than creating its own arbitrary standards, which helps maintain consistency across jurisdictions. Because the AI field still lacks agreed-upon standards on dangerous behavior, the law’s framework and reporting provisions are intended to produce the information policymakers need to refine their laws and craft more responsive regulations in the future.

Concerns with SB 53

Despite the law’s strengths, the definition of a “frontier” model still leaves room for improvement. For now, the threshold of 10^26 FLOPs and the $500 million revenue threshold for large developers create a clear and narrow scope. Former Google CEO Eric Schmidt is among those who recommended the 10^26 FLOPS threshold. But, in the future, this static threshold can drift away from the capability it was meant to capture.

History has shown that algorithmic efficiency often doubles every 16 months, meaning a new update to the law will be required time and time again. If the threshold stays the same, it will miss new models that are just as powerful but trained with less compute, while still flagging older, inefficient ones. Whether the newly created California Department of Technology (CDT), charged with recommending changes to that threshold annually, can successfully convince the legislature remains to be seen.

Another concern with SB 53 is that the reporting obligations, though well-intentioned, may become a mere administrative formality, with companies producing data that checks the box without improving understanding of real issues. The law requires large developers to file quarterly summaries of their internal catastrophic-risk assessments, even when nothing has changed. Unless the information collected is analyzed and shared by the OES in ways that genuinely improve a regulator’s understanding of risk, this could just turn into a bureaucratic sludge that buries insights into true risks.

Looking beyond California: State-based AI best practices in lieu of a federal standard

A flexible scope would also help keep state rules consistent until there is a federal law. Right now, however, the states point in different directions: New York’s “Responsible AI Safety and Education RAISE Act” (A 6953), for example, also covers models with 10^26 FLOPs, but goes further to include models with very high training costs (about $100 million) and even covers smaller models if building them costs at least $5 million. Michigan’s House Bill 4668 skips the compute threshold altogether and simply covers any entity that spent at least $100 million in the past year and $5 million on any single model.

Looking ahead, if five or 10 more states adopt their own definitions, this emerging state patchwork will only grow more complicated and difficult to comply with. The practical solution could be keeping the definition of the “frontier” aligned by following the same national and international standards. This would avoid putting developers through a dozen different playbooks.

California Senate Bill 53, even with all its flaws, may serve as that model. But the real test of SB 53 will be the value of the information it produces from transparency reports and assessments. If those reports reveal meaningful patterns in model behavior and help the state more effectively respond to risks, California could set an example for others to follow. But if those reporting requirements turn into routine filings and formal checklists, the California experiment could show the limits of transparency laws, potentially pushing legislators toward heavier tools.

The post California’s AI law works by staying narrow appeared first on Reason Foundation.

Report ranks every state’s debt, from California’s $497 billion to South Dakota’s $2 billion

Mariana Trujillo — Thu, 23 Oct 2025 04:02:00 +0000

State governments had $2.7 trillion in debt at the end of 2023, a new Reason Foundation analysis finds. This state debt is equivalent to approximately $8,000 per person nationally.

With $497 billion in liabilities, California had the largest state government debt as of the end of the 2023 fiscal year, the most recent year for which complete data are available.

Four other state governments had more than $200 billion in state debt: New York ($233 billion), Illinois ($223 billion), Texas ($217 billion), and New Jersey ($213 billion). Massachusetts had $120 billion in state liabilities, followed by Connecticut, Washington, Pennsylvania and Florida.

Meanwhile, 10 states—South Dakota, Idaho, Nebraska, Montana, New Hampshire, Utah, Vermont, Rhode Island, Wyoming, and Maine—each had less than $10 billion in debt at the end of 2023, according to Reason Foundation’s State and Local Government Finance Report.

On a per capita basis, Connecticut had the highest state debt, with $26,187 of debt per state resident at the end of 2023. With $22,968 in debt per resident, New Jersey was the only other state with more than $20,000 in liabilities per capita.

Reason Foundation finds 13 states—Connecticut, New Jersey, Hawaii, Delaware, Illinois, Massachusetts, Wyoming, Alaska, North Dakota, California, Washington, New York, and Vermont—had more than $10,000 in debt per resident.

Of other more populous states, Texas had $7,443 in per capita debt, Pennsylvania reported $5,872 per capita, and Florida had $3,334 in debt per capita.

The state governments with the lowest per capita debt at the end of 2023 were Tennessee, Utah, Nebraska, Idaho, South Dakota, Oklahoma, and Indiana, each with less than $3,000 in debt per resident.

Total state debt, reported as total liabilities, includes money state governments owe in the near term, such as unpaid bills and accrued payroll, as well as long-term obligations, including bonds, public pension benefits, and retiree health care benefits.

State governments’ long-term debt

Approximately 72% of state government debt is long-term, meaning it is due in more than one year. This long-term debt consists of bonds, loans, and notes (33%), unfunded public employee pension benefits (35%), unfunded public employee retiree health care benefits (22%), and accrued public employee leave payouts (2%).

State governments collectively reported $1.9 trillion in long-term debt, or approximately $5,800 per capita nationally, as of the end of 2023.

Reason Foundation found 29 states held at least $10 billion in long-term liabilities at the end of 2023.

Six of those states had more than $100 billion in long-term liabilities each: California ($299 billion in long-term debt), Illinois ($199 billion), New Jersey ($197 billion), Texas ($171 billion), New York ($154 billion), and Massachusetts ($104 billion).

Connecticut had the highest per capita long-term debt in the nation, at $23,934 per resident. New Jersey was just behind, with $21,197 in long-term debt per capita.

Hawaii, Illinois, Delaware, and Massachusetts were the other states with long-term debt exceeding $10,000 per capita at the end of 2023.

Of the larger states, New York ranked 12th in per capita long-term debt, with $7,615 per resident. California ranked 13th, with $7,552 per capita long-term debt. Texas was 16th, with $5,870 per capita. Florida ranked 37th in the nation in long-term liabilities, with $2,129 per capita.

Nebraska, Tennessee, Utah, and South Dakota were the only states reporting less than $1,000 per capita long-term debt at the end of 2023.

State public pension debt

Unfunded public employee pension liabilities occur when governments allocate fewer assets than necessary to fulfill the retirement benefits promised to public workers and retirees.

State governments collectively reported $664 billion in unfunded public pension obligations, equivalent to 35% of their long-term debt, or approximately $2,000 per capita nationally, as of the end of 2023.

As of the end of 2023, Illinois had the largest state pension debt, at $145 billion. It was the only state with more than $100 billion in state public pension debt.

California had the second-most state pension debt, $90 billion, which is primarily the state government’s portion of the larger unfunded liabilities held by the California Public Employees’ Retirement System and the California State Teachers’ Retirement System.

Five other state governments reported over $20 billion in pension debt: New Jersey ($80 billion), Texas ($55 billion), Massachusetts ($42 billion), Connecticut ($40 billion), and Kentucky ($29 billion)

On a per capita basis, Illinois again had the most pension debt, with $11,355 per resident. Connecticut was close behind with $11,192 per capita pension debt.

The remaining top 10 states with the highest per capita pension debt were New Jersey, Kentucky, Massachusetts, Alaska, Vermont, Hawaii, New Mexico, and Maryland.

In per capita pension debt, California ranks 14th, at $2,272 per resident; Texas ranks 16th, at $1,870; Florida ranks 41st, at $362; and New York ranks 49th, at $-157.

Three states did not have state pension debt at the end of 2023. Washington, New York, and South Dakota each reported more assets than projected liabilities across public pension systems.

State governments’ outstanding bonded debt

Nationally, state governments reported $630 billion in outstanding bonds, loans, and notes—33% of all state long-term liabilities, Reason Foundation finds. On a per capita basis, the state’s debt from bonds, loans, and notes equals about $1,900 per American.

California has the most outstanding bond debt, with $111.8 billion.

Texas has the second most bond debt, with $67 billion, followed by New York ($50 billion), Massachusetts ($46 billion), Illinois ($30 billion), Connecticut ($29 billion), Washington ($28 billion), New Jersey ($27 billion), Maryland ($22 billion), and Florida ($17 billion).

Two state governments, Indiana and Nebraska, reported zero outstanding bond debt at the end of 2023.

In per capita terms, the state governments of Hawaii and Connecticut rank first and second, respectively, with outstanding bonds of over $8,000 per resident.

Massachusetts, Delaware, and North Dakota follow, all with outstanding bond debt exceeding $4,000 per capita.

California ranked 10th, with $2,828 bond debt per resident. New York ranked 12th, with $2,487 per capita. Texas reported $2,284 in bond debt per resident, the 14th highest in the country, and Florida ranked 39th, with $785 per capita.

Indiana, Nebraska, Wyoming, Montana and Tennessee each reported less than $250 of bonded debt per resident. Indiana and Nebraska reported no outstanding bonds.

All figures in Reason Foundation’s State and Local Government Finance Report are sourced from state governments’ own financial reports, most often their annual comprehensive financial reports. The data in this report is from the 2023 fiscal year, the most recent year for which complete data are available. Nevada has not reported 2023 data. Therefore, the data the state reported for 2022 was used. Despite a thorough review, data collection at this scale can result in discrepancies. Please alert us if you identify any errors.

For personalized reports on municipal entities or more detailed information on assets, liquidity, and solvency, please visit the GovFinance Dashboard.

If you have any questions or would like to discuss this data further, please email Mariana Trujillo at mariana.trujillo@reason.org or Jordan Campbell at jordan.campbell@reason.org.

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Report: State and local governments have $6.1 trillion in debt

The post Report ranks every state’s debt, from California’s $497 billion to South Dakota’s $2 billion appeared first on Reason Foundation.

Report: State and local governments have $6.1 trillion in debt

Mariana Trujillo — Thu, 23 Oct 2025 04:01:00 +0000

State and local governments had $6.1 trillion in debt at the end of 2023, a new Reason Foundation analysis finds. On a per capita basis, state and local debt amounts to approximately $18,400 per American. This state and local debt is in addition to the $38 trillion national debt.

Of the $6.1 trillion in state and local debt, $2.66 trillion is held by state governments, $1.4 trillion by municipalities, $1.27 trillion by school districts, and $757 billion by counties.

Reason Foundation’s State and Local Government Finance Report finds that $1 trillion is owed by California’s state and local governments, most in the country.

New York’s state and local debt is the second-highest in the nation, at $798 billion, followed by Texas’s $550 billion in state and local debt, Illinois’s $407 billion, New Jersey’s $310 billion, and Florida’s $242 billion.

Additionally, Massachusetts, Pennsylvania, Ohio, Washington, Michigan, Georgia, Maryland, Connecticut, North Carolina, and Colorado each have more than $100 billion in state and local government debt.

At the end of 2023, the most recent year for which complete data is available, 48 of the 50 states had at least $10 billion in total debt.

Only Vermont ($8.8 billion) and South Dakota ($5.9 billion) had less than $10 billion in state and local debt.

State and local government debt includes both short- and long-term obligations—from salaries due at the end of this month to bonds maturing decades from now. The $6.1 trillion in liabilities includes $1.5 trillion in public pension obligations, and $958 billion for retiree health care obligations,

In per capita terms, New York’s state and local debt is the highest in the nation. New York’s state government, cities, counties, and school districts hold debt of $39,491 per resident. This is more than double the national average of about $18,400, according to Reason Foundation’s analysis.

In addition to New York, four other states had per capita state and local debt exceeding $30,000 per resident at the end of 2023: Connecticut ($34,592), New Jersey ($33,338), Illinois ($31,783), and Hawaii ($30,399).

Massachusetts, California, Alaska, North Dakota, Delaware, Wyoming, and Maryland also had state and local liabilities of over $20,000 per resident.

Texas ranked next highest, 13th overall, with $18,872 in debt per Texan. Florida ranked 32nd, with $11,217 per person.

State and local debt was lowest in Idaho, Indiana, South Dakota, Tennessee, and Oklahoma, where the liabilities were less than $7,500 per resident at the end of 2023.

State and local government long-term debt

About 80% of state and local debt is long-term, meaning it is due in more than a year. This long-term debt category consists of bonds, loans, and notes (41% of the total), unfunded public pension liabilities (32%), unfunded retiree health care benefits (20%), and accrued leave payouts (2%).

Nationally, state and local governments reported $4.9 trillion in long-term debt at the end of 2023, Reason Foundation’s State and Local Government Finance Report finds. On a per capita basis, long-term debt amounts to approximately $14,700 in state and local debt for every person in the United States.

California, New York, Texas, Illinois, and New Jersey hold the largest long-term debt totals. Together, these five states account for $2.5 trillion, over half of the national total of $4.9 trillion in long-term liabilities.

There are 14 states where long-term state and local debt exceeds $100 billion, and 36 states where it is more than $20 billion.

In per capita terms, New York reported the most state and local long-term debt, at $31,369 per New Yorker, followed closely by New Jersey’s long-term state and local debt of $31,064 per person.

State and local long-term debt exceeds $20,000 per person in Connecticut ($30,998), Illinois ($28,291), Hawaii ($26,271), Massachusetts ($24,520), and California ($20,280).

Texas ranked 10th, with $15,818 per capita in long-term debt, and Florida ranked 30th, with $8,926 per Floridian.

Idaho, South Dakota, Indiana, Oklahoma, and Tennessee have the lowest long-term debt, with each state having less than $5,200 per resident.

State and local government pension debt

Unfunded public employee retirement liabilities, also known as public pension debt, form when governments set aside fewer assets than required to fulfill promised benefits.

Nationally, state and local governments reported $1.5 trillion in pension debt, or 32% of long-term liabilities, at the end of 2023. On a per capita basis, this state and local public pension debt amounts to approximately $4,600 per American.

California carries the most total state and local public pension debt in the nation, with $269 billion in unfunded liabilities.

Illinois ($228 billion in unfunded liabilities) reported the second most public pension debt in the country.

New Jersey ($98 billion in pension debt), Texas ($96 billion), Pennsylvania ($70 billion), New York ($63 billion), and Florida ($62 billion) all had unfunded pension liabilities exceeding $60 billion at the end of 2023.

These top seven states account for more than half of the nation’s state and local pension debt.

In per capita terms, Illinois has the most unfunded pension liabilities: $17,786 per resident.

Connecticut ($12,997) and New Jersey ($10,601) were the two other states with public pension debt exceeding $10,000 per capita.

Massachusetts, Alaska, Kentucky, and Hawaii are the next highest, with each state’s per capita pension debt reaching over $7,000 per person, well above the national average of about $4,600.

California, despite its large aggregate pension burden, ranks only 8th in per capita pension debt, with $6,796 per resident.

Texas ranks 29th in per capita public pension debt, at $3,277 per resident, and Florida ranks 33rd, with $2,868 per resident.

Two states, Washington and South Dakota, reported no public pension debt in 2023.

State and local government OPEB debt

Other post-employment benefits (OPEB) primarily consist of unfunded retiree health care promised to public employees. Unlike pension benefits, most governments have not pre-funded these obligations, leaving other post-employment benefits (OPEB) almost entirely unfunded.

Nationally, state and local governments report $958 billion in OPEB debt, which accounts for 20% of their long-term liabilities. On a per capita basis, OPEB debt equals about $2,900 per American.

New York reports the largest aggregate OPEB debt among its state and local governments in the country. With $303 billion in OPEB debt at the end of 2023, New York is responsible for about one-third of the nation’s aggregate OPEB debt.

California has the second-highest OPEB debt, with over $147 billion, followed by New Jersey ($98 billion) and Texas ($77 billion).

Eleven other states have at least $10 billion in OPEB debt.

In per capita terms, New York again ranks first, with $15,017 in OPEB debt for each New Yorker.

New Jersey follows with $10,599 per capita OPEB debt, Delaware with $8,448 per capita, Connecticut with $6,657, and Massachusetts with $6,308.

California ranks 8th, at $3,712 per resident. Texas ranks 10th, at $2,649, and Florida ranks 29th, at $689.

Alaska, Ohio, Utah, Idaho, and South Dakota report OPEB debt of less than $110 per resident.

State and local outstanding bonded debt

Bonds, loans, and notes represent the portion of state and local liabilities explicitly borrowed in credit markets. Unlike pensions or OPEB, which accumulate as estimated unfunded promises, these instruments are contractual debt obligations with fixed repayment schedules.

Nationally, state and local governments report $2 trillion in outstanding bonds, loans, and notes, which represents 41% of their long-term liabilities. On a per capita basis, this equals $6,100 per resident.

California leads with the largest stock of outstanding bonds and loans, totaling $334 billion across state and local issuers.

Texas owes $287 billion in outstanding bonds and loans, followed by New York ($197 billion), Illinois ($98 billion), and Florida ($81 billion).

Together, these five states account for about half of all outstanding municipal bonds and loans.

The per capita rankings differ significantly. Hawaii owes $14,295 per Hawaiian in bonds and loans.

Connecticut and Massachusetts follow, owing more than $10,000 per resident. Texas, New York, and North Dakota, with more than $9,000 per resident, are next.

Montana, Wyoming, Idaho, and Alabama each have less than $2,000 of bonded debt per resident.

All figures in the State and Local Government Finance Report are sourced from the financial reports of state and local governments, most often their annual comprehensive financial reports. The data is from the 2023 fiscal year, the most recent year for which complete data are available. Nevada and a handful of cities and counties across the country have not reported 2023 data. Therefore, the data reported for 2022 was used. Despite a thorough review, data collection at this scale can result in discrepancies. Please alert us if you identify any errors.

For personalized reports on municipal entities or more detailed information on assets, liquidity, and solvency, please visit the GovFinance Dashboard.

If you have any questions or would like to discuss this data more, please email Mariana Trujillo at mariana.trujillo@reason.org or Jordan Campbell at jordan.campbell@reason.org.

Related:

Report ranks every state’s total debt, from California’s $497 billion to South Dakota’s $2 billion

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Ohio lawmakers consider bill to promote an independent childhood

Zachary Christensen — Mon, 20 Oct 2025 10:30:00 +0000

A new law currently under consideration in the Ohio legislature, Senate Bill 277, would grant parents much-needed assurance that they can let their children engage in safe, reasonable activities like walking to the store or playing around the neighborhood without mandating around-the-clock adult supervision. If passed, the Buckeye State would join 11 other states—red, blue, and purple—that have already adopted this type of legislation, commonly called “Reasonable Childhood Independence” laws.

Parents around the U.S. have had concerning interactions with law enforcement because their kids had engaged in seemingly innocuous activities without direct supervision. Brittany Patterson, a mother from Georgia, was arrested last year after her 10-year-old son ventured to the store alone in her small town of 370 residents while she was at a doctor’s appointment with her other son. A concerned passerby noticed the boy walking alone and contacted the police, which ultimately culminated in her being arrested and handcuffed in front of her kids. Then came a lengthy legal process between Patterson and the authorities.

A single mother in Pennsylvania, responsible for two children and her 13-year-old brother, faced severe legal consequences when she briefly left her 1-year-old in the young brother’s care to run an errand. Intervention by authorities resulted in the mother’s placement on the state’s child abuse registry, which subsequently made it almost impossible for her to secure employment as a home health aide.

The constant threat of government intervention has had a significant chilling effect on parents who wish to give their children space to develop through independent activities. Why would someone allow their child to play outside unsupervised—an activity that used to be considered normal and safe—when there is a chance that it could result in punishment?

Experts are gaining a better understanding of how excessive parental protection negatively impacts both children and families. A study published in The Journal of Pediatrics in 2023 established a causal link between declining childhood independence over several decades and a rise in anxiety and depression among children. One of the authors of that study and professor of developmental psychology at Boston College, Peter Gray, testified before a Pennsylvania committee that the way children develop a robust sense that they can handle challenges is through regular independent opportunities without parents hovering over their every decision.

But parents must feel comfortable to grant these opportunities for independent activities. At the heart of the issue lies the imprecise and subjective nature of child neglect laws, which allow considerable discretion to law enforcement and social workers to decide what qualifies. Although government safety workers undoubtedly act with what they believe to be the child’s best interests at heart, in most situations, a child’s own parent remains the most suitable judge of what is appropriate.

This legislative session presents Ohio lawmakers with a crucial chance to tackle this issue head-on. SB 277 aims to remove subjective language and sharpen the definitions of neglect and abuse within Ohio’s current laws. The bill will clearly permit specific activities, such as children walking to and from school or stores, engaging in outdoor play, and remaining home alone for appropriate durations, all while continuing to forbid genuinely harmful neglect or endangerment. This legislation would empower Ohio parents to make sound choices for their children without the fear of inconsistent interpretations of what constitutes appropriate parenting. It would provide them the liberty to foster independence confidently during a vital stage of development.

This bill would have Ohio join several other states (including Georgia, Florida, and Missouri just last year) in adopting “reasonable childhood independence” laws. Through close partnership with the nonprofit Let Grow, whose president, Lenore Skenazy, writes for Reason magazine, Reason Foundation has promoted this same type of bipartisan law in over 10 states.

Ohio lawmakers have a chance to send a clear message to parents that they have their back when it comes to nurturing independent and resilient children. The legislature should seize this opportunity to promote childhood independence by passing SB 277.

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LAUSD celebrates mediocre test scores

Jude Schwalbach — Wed, 17 Sep 2025 04:02:00 +0000

California officials are celebrating the latest state test scores from the Los Angeles Unified School District, which bettered the district’s pre-pandemic scores for the first time.

“This is not just a rebound. This is a breakthrough. We didn’t just meet expectations–we exceeded them,” boasted LAUSD Superintendent Alberto M. Carvalho.

If these test results are the definition of a breakthrough success, LAUSD’s bar for student achievement wasn’t particularly high.

Despite the recent gains, LAUSD’s latest scores show that less than 47% of students met or exceeded their grade-level standard in English Language Arts. Moreover, just 36 percent were at or above the grade-level standard in math, meaning nearly two in three students didn’t meet the basic standard.

It’s a positive that LAUSD’s test scores are about on par with California’s average statewide results from the previous school year (full 2024-25 results have not yet been released). However, statewide results have also not recovered from their post-pandemic slump, when the number of students who met or exceeded the standard for both English and math declined by four percent compared to the 2018-19 school year.

The state and school district have a long way to go to improve their academics, but producing higher test scores can be part of an effort to win back families who have left for alternatives such as charter schools, private schools, and homeschooling. Since the start of the COVID-19 pandemic, the Los Angeles Unified School District has lost more than 70,000 students.

In addition to the kids opting for other schools, LAUSD also has an absentee problem. As of the 2023-24 school year, nearly one in three LAUSD students were chronically absent, meaning that they missed 10% or more of the school year. This means that over 130,000 LAUSD students cumulatively missed at least 2.3 million days of school that school year. The problem was most prevalent among high school students, with about 37% of them categorized as chronically absent.

To the district’s credit, the latest absentee rate is an improvement from the 2021-22 school year, when more than 45% of students were chronically absent. However, the current rate of chronic absenteeism remains well above pre-pandemic levels, when only 18% of LAUSD students were categorized as such during the 2018-19 school year.

To encourage students to return to school, the district made home visits and provided wrap-around services, such as customized bussing, medical care, and even laundry services.

“For every one percent of daily attendance improvement, particularly for the most fragile students, we see a nine percent improvement in academic performance,” Superintendent Carvalho told The 74.

LAUSD needs to get students into classrooms and ensure they are learning once there. It’s a good sign that in recent years, LAUSD has adopted lesson plans based on the ‘science of reading,’ which examines how most kids learn and how to best teach them how to read. This aligns the district with decades of research on best practices associated with reading and could help many of its students, more than half of whom struggle to read.

Yet, the rollout and ensuring proper training for programs like this are essential to effective instruction. Scaling programs can be a challenge, especially for a district as large as LAUSD, which has a significant number of English learners and children from low-income families. A 2024 report by Families in Schools, an advocacy group, found that some LAUSD teachers in their survey were still unfamiliar with the term “science of reading,” admitting that they would need additional training on the concept and its associated lessons.

LAUSD has taken some crucial steps in the right direction, but much work remains to be done. Reducing chronic absenteeism and getting students to attend school regularly, along with training teachers on proven best practices that help kids learn math and reading, could be the start of a truly breakthrough success that’s more significant than this year’s slight improvement in test scores.

A version of this column first appeared in the Los Angeles Daily News

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How the One Big Beautiful Bill Act taxes gamblers on money they didn’t keep

Michelle Minton — Tue, 12 Aug 2025 10:00:00 +0000

Imagine hitting a $1,500 jackpot on a Vegas slot machine, losing it all before leaving the casino, and yet still owing hundreds in taxes at the end of the year. That could be the reality for gamblers in America thanks to a new federal tax rule quietly slipped into the so-called One Big Beautiful Bill Act.

Until now, the tax system imposed on gambling mostly made sense: If you won money, you paid taxes on your net winnings—the money you made after subtracting the amount spent on losing bets. But, under the new rule, gamblers will no longer be able to deduct the full value of their losses, capping such deductions at 90% of reported winnings. This creates a tax on phantom income—forcing gamblers to pay federal income taxes on up to 10% of their winnings even if they end up losing all of it and more by year’s end.

The change is projected to raise between $125 million and $165 million in additional tax revenue annually, or around $1.2 billion over the next decade, according to a report by the Joint Committee on Taxation. But this projection ignores gamblers’ long history of sidestepping punitive gambling laws on land, sea, and via the internet. If gamblers were to hide even just 10% more of their winnings—a likely outcome—it would completely negate the additional revenue generated by the new rule. Combined with the adverse effect the new tax would have on corporate and payroll taxes from industry contraction, the cap could result in a net tax revenue loss.

Underreporting of gambling winnings is already a known and longstanding problem. From 2018 through 2020, just under 150,000 Americans failed to file tax returns on approximately $13.2 billion in gambling winnings, according to a report from the Inspector General for Tax Administration. The new rule will likely only make such underreporting more widespread.

Some gamblers aware of the change might begin to avoid the types of large-prize games that trigger IRS paperwork, like winning $1,200 or more at a slot machine or $5,000 at a poker tournament. Vacation gamblers may similarly shift from Las Vegas to Macau, or to European and Caribbean casino destinations, where their winnings are not automatically reported to the U.S. government. Many gamblers will also likely turn to offshore gaming websites, which also do not report gambling winnings to the IRS, some of which now accept bets in even harder-to-track cryptocurrencies.

But the damage extends far beyond an uptick in underreported gambling winnings. Mid- and high-stakes poker tournaments could face collapse as players weigh hefty buy-in fees and other costs against diminished returns. Fewer entrants mean smaller prize pools and likely fewer events for professionals. Poker coach Phil Galfond warned the rule would essentially end professional gambling in the U.S. Alex Cane, CEO of the betting exchange Sporttrade, echoed the sentiment, declaring that no gambler “serious about betting is going to bet anymore, or at least not going to report that they do.” Casino owner Derek Stevens similarly worried about the impact on Vegas casino-resorts, arguing that the new rule would force many bettors to move offshore.

The stakes are also existential for states invested in the gaming industry, like Nevada, where gambling taxes fund around 35% of the state’s budget and where the industry supports around 27% of the state’s workforce. Nationwide, the $330 billion gaming industry directly employs around 700,000 people and supports a total of 1.8 million jobs, according to industry data. All of that could be threatened as gamblers inevitably seek out alternatives to avoid the new tax.

These concerns prompted Nevada Rep. Dina Titus (D-Clark County) to introduce the Fair Accounting for Income Realized from Betting Earnings Taxation (FAIR BET) Act days after the passage of the new rule. Her bill would restore the 100% deduction for gambling losses, eliminating the phantom tax. The legislation represents more than fairness for gamblers—it is protection for the nearly 2 million American jobs and state budgets relying on a healthy U.S. gaming industry.

The phantom tax provision in the new rule appears solely aimed at raising federal revenue from a politically vulnerable group. Though most Americans gamble occasionally, few will defend the activity against tax hikes. But this short-sighted policy risks repeating past mistakes.

When taxes make legal gambling punitive, players simply move underground. Unregulated bookies thrived when sports betting was banned in the U.S. Offshore websites boomed after the crackdown on online poker. The new rule guarantees that history will repeat itself—shrinking the legal industry, fueling illicit activity, and ultimately costing jobs and revenue.

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Debtor Nation 2025

Jordan Campbell — Thu, 17 Jul 2025 16:00:51 +0000

The size and pace of growth of the national debt are unsustainable. Over the last 12 months, the total public debt outstanding has grown by over $1.5 trillion. With the national debt at over $36 trillion, the United States’ debt-to-Gross Domestic Product (GDP) ratio now exceeds 120%, surpassing the peak reached after World War II.

Interest payments on the national debt are also climbing. In May, Moody’s downgraded the U.S. credit rating from AAA to Aa1.

Still, the political will to address the national debt and federal budget deficits does not exist in meaningful numbers on either side of the political aisle. To get a clearer picture of why the national debt matters to taxpayers and future generations, how we got here, who holds this debt, and what would need to be done to rein it in, Reason Foundation built Debtor Nation.

Why the national debt matters

The national debt is expensive: Debt incurs high interest costs, diverting taxpayer funds from productive uses to pay interest to bondholders.
Debt burdens economic growth: Interest payments on the national debt consume a rising portion of the national budget and gross domestic product (GDP). This borrowing stifles economic growth by absorbing capital from the private sector, making borrowing more expensive for taxpayers and businesses.
Debt imposes unfair costs on future generations: Future taxpayers are on the hook to pay for today’s deficits. They must accept either higher taxes, inflation, or reduced government services.
The debt is becoming unaffordable: The current debt and projected reliance on debt increases the risk of higher borrowing costs, insolvency, and default.

How we got here

The annual U.S. debt-to-GDP ratio reached 120% in 2024, exceeding levels last seen immediately following World War II.
Federal expenditures consistently outpace revenue, driving continued debt growth. Given that federal receipts bounce between 15% and 20% of GDP, spending more than 20% of GDP is simply not sustainable in the long term.
Federal debt growth transcends party lines, driven by major events and policy decisions across presidential administrations and congresses.

Who holds the federal debt?

The federal debt is divided between intragovernmental holdings (primarily the Social Security Trust Fund) and debt held by the public.
Public debt holders include domestic investors, foreign entities, and the Federal Reserve, which has significantly increased its holdings in recent years.
Foreign ownership of U.S. debt represents a substantial portion, raising opportunities and potential economic stability risks.

Where does the federal government spend money?

Mandatory spending, including Social Security and Medicare, accounts for a significant portion of federal outlays, exceeding 65% of total annual expenditures.
Interest payments on the national debt have reached historic levels, creating additional budget pressure.
At $908 billion, defense spending remains the largest discretionary budget item, dwarfing other discretionary spending categories.

Conclusion

You can view the full Debtor Nation data visualization tool here. The tool includes more insights into our national debt, along with a calculator that shows exactly what changes the federal government would need to make to help us climb out of the situation the national debt has put taxpayers and future generations in.

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Public employees are not underpaid

Mariana Trujillo — Thu, 10 Jul 2025 10:00:00 +0000

It is commonly believed that public employees and teachers earn less than their counterparts in the private sector, and this compensation disparity is undermining the ability of government employers to retain staff and recruit talent. This assertion often leads to demands for either increased pension benefits or higher salaries. The general public and policymakers have embraced this statement as an unquestioned fact, even though it is not. 

On average, public employees earn 42% more than private sector employees. But averages are not very meaningful in this context. The public sector is more white-collar than the private sector. A larger share of public employees hold college and graduate degrees than those in the private sector. Therefore, it is expected that the average public employee would earn more than the average private sector employee.

To assess the competitiveness of public employee compensation, it is important to evaluate how public employees are paid compared to private workers in the same industry, with the same education level, and with similar aptitudes. In all these comparisons, when adjusted for work hours and benefits, there is no meaningful compensation gap between public and private employee pay. In fact, when adjusting for aptitude, the results indicate that public employees, including teachers, sometimes earn more than their comparable private sector counterparts.

Employees accept the best job offer available to them. If public employees were systematically ‘underpaid,’ that is, making less than they would if doing the exact same job in the private sector, why wouldn’t they join the private sector? The mere existence of public employees suggests that their total compensation, accounting for non-monetary benefits of public sector work such as meaning and job security, must be fair for the work asked of them.

This piece examines the compensation of public and private sector employees, making adjustments that are often overlooked in public discourse.

Average salaries are higher in the public sector

According to the Bureau of Labor Statistics, state and local public employees earn wages that are, on average, 26% higher than those of private sector workers. When benefits are taken into account, this pay disparity increases to 43%.

On average, a larger share of public employees’ compensation is composed of benefits, with benefits representing 38% of total employee costs for state and local employees, compared to 30% in the private sector.

These public employee benefit costs are likely understated. While the Bureau of Labor Statistics accounts for direct employer contributions, it does not capture the retroactive contributions governments often make to address past underfunding. For example, a city may have paid in full the mandatory employer pension contributions for its teachers in 2010, only to realize years later that those contributions were inadequate due to overly optimistic investment assumptions. To close the gap, the city may issue pension obligation bonds, utilize lottery revenues, or amortize the shortfall over future budgets. These catch-up contributions—often made in lump sums—mean that benefit costs and total compensation for teachers employed in 2010 were understated; however, this correction is not reflected in the BLS compensation data.

Another reason public employee benefit costs are often understated is that state and local employers tend to provide more generous retiree healthcare benefits than private employers, known as other post employment benefits (OPEB). These benefits are typically not pre-funded, meaning employers do not set aside money to cover these costs in advance; instead, they pay as the benefits are used. Even when employees and employers make OPEB contributions during working years, these amounts are often insufficient to cover future obligations. Therefore, under current funding practices, actual OPEB costs are generally not directly linked to specific employees; instead, they become a collective employer obligation incurred by government employers as former employees retire and draw the benefits.

But public and private sector employees are not the same

Though these averages describe the compensation of public and private sector workforces, there are also important characteristic differences in these workforces that should be understood. This is not an apples-to-apples comparison, as the pool of employees in the private sector is not the same as the pool of employees in the state and local government. In comparison to the public sector, the private sector hires more service-sector workers and fewer specialized labor, having a higher proportion of its labor force made up of part-time workers and minimum-wage employees who receive fewer benefits than professionals.

In fact, according to the Bureau of Labor Statistics, 58% of state government jobs and 48% of local government jobs require an associate’s degree or higher, while only 27% of private sector jobs do. This structural difference means a meaningful assessment of public employees’ compensation should attempt to adjust average salaries for industry, experience, education, and aptitude.

Adjusted public and private sector salary comparison

How do public employees get paid in comparison to private sector employees with the same educational attainment? According to the Bureau of Labor Statistics, as discussed, public employees make more on average—but when breaking down by education, it is revealed that those with an associate’s degree or higher who work for state or local governments earn less than their private sector counterparts. This finding also holds true for public employees in the federal government.

This analysis, however, doesn’t account for benefits, which tend to be much more generous in the public sector than in the private. A study from the Center for Retirement Research concluded that while public-sector wages were generally lower, the inclusion of defined-benefit pensions and retiree healthcare often brings total compensation to parity or higher compared to private-sector jobs.

Additionally, a paper published in the American Economic Association Journal that adjusted compensation for both benefits and worker aptitude found that “public sector workers, especially local government ones, on average, receive greater remuneration than observably similar private sector workers.”

But even when accounting for benefits, some estimates still found that one specific kind of public employee—teachers—are paid less than other college graduates. The Economic Policy Institute (EPI) found that public teachers’ weekly wages, when controlled for summer break, age, education, and state of residence, were 26% lower than those of other college graduates—a record-high gap and a significant increase from ‘just’ 6% in 1996. After accounting for benefits, the EPI still found that teachers earn 17% less, and that teachers’ total compensation, adjusted for inflation, has not grown in decades.

However, comparing salaries across fields by controlling for education and years of experience doesn’t reveal much. There are significant disparities among college majors and industries. For example, according to the 2023 Census American Community Survey, the median computer science graduate with a bachelor’s degree only earns $101,600 a year, while the median Marketing graduate only earns $75,930—yet few people would immediately conclude that computer science majors are “overpaid”, and marketing majors “underpaid”. Not all college graduates and fields of work have the same earning potential. Not all jobs performed by college graduates are equally demanding. Additionally, it is also important to note that degree choice tends to reflect the underlying aptitudes of students, which cannot be assumed away.

Wage differences do not necessarily indicate a problem. It can be a reflection of intrinsic differences in populations and the sacrifices and competitiveness of different fields. The gap in earnings between teachers, or all public employees, and other college graduates in the private sector could be explained by self-selection effects. It is possible that the most career-driven and productive college graduates tend to be drawn to the private sector, which is willing to offer one-to-one salaries proportional to individual competence, whereas the public sector opts for generalized collective wage agreements—a system that research repeatedly shows tends to drive away the most productive employees.

Going further than the EPI, a paper written by Jason Richwine and Andrew Biggs with Heritage Foundation aimed to investigate the public teacher pay gap, adjusting for aptitude. Though teachers tend to be paid less than other college graduates, the paper concluded that the wage gap between Teachers and other graduates was driven by the fact that, on average, the teaching profession tends to attract college graduates with lower aptitudes than the average college graduate.

For example, students who intended to be education majors, on average, scored in the 38th percentile on the SAT, which is significantly below the average for college-bound seniors. Another paper found that those with the highest ACT scores are less likely to become teachers, and the most likely to leave the profession.

Richwine and Biggs found that replacing educational attainment with a more meaningful measure of competence eliminates the observed teacher pay gap, as non-teachers of the same aptitude level tend to earn the same as teachers (controlling for summer break). The authors find that public teachers’ total compensation is 52% higher than their estimated fair-market value.

This suggests that comparing teachers’ wages to those of other college graduates is inappropriate, as teachers’ formal education credentials aren’t a reliable predictor of their actual market-earning potential. This is further supported by another study, which found that just 3.7% of Georgia elementary teachers and 5.4% of high school teachers who left their jobs for a non-education field were earning more than the minimum teaching wage a year after their exit.

Public employees also receive a benefit that cannot be captured in balance sheets. Most notably, public employment is known for its job security, a feature Richwine and Biggs estimated employees value at about 8.6% of compensation.

But, are the work hour estimates fair? Aren’t teachers more likely to work overtime? Not according to the data available. A 2014 paper using the American Time Use Survey (ATUS) found that teachers work on average 39.8 hours per week, while nonteacher college graduates work 41.5 hours. In 2019 update, Dick Startz applied the same methodology to more recent ATUS data and confirmed the pattern: full-time teachers averaged 42.2 hours per week, while similarly educated nonteachers worked 43.2 hours.

You get what you pay for

The consensus among analyses is that, on average, when accounting for experience, education, and benefits, public employees tend to make about the same—or more—than equivalent private sector workers. This doesn’t mean that compensation is always perfectly efficient, or that bargaining is irrelevant; instead, it suggests that observed compensation levels do not indicate a systemic undervaluation of public sector work.

This shouldn’t be much of a surprise. Compensation—in total terms, including salary, work conditions, and benefits—is accepted by workers who would have gladly accepted better employment if it had been offered to them. Employees take and stay in the best job they could find, one that maximizes each person’s preferences and values. Beyond compensation, for example, some individuals value a work-life balance and meaning, while others prioritize novelty and growth. Some can speak well, code effectively, or lead; others cannot. If public employees were ‘underpaid,’ why wouldn’t they simply take an equivalent private sector job that pays more? If compensation is inappropriate, why wouldn’t agencies or government branches compete in a salary arms race to poach the best people? If they can’t or won’t, that suggests their total compensation is likely fair for the work asked of public employees.

If public employees were systematically underpaid, we would simply observe large-scale exits to the private sector, which we don’t. In fact, public employee and teacher turnover rates tend to be much smaller than those of the private sector.

Despite much research indicating otherwise, public employees often report feeling underpaid. This persistent grievance suggests that government employers should consider shifting their compensation so that salaries represent a larger share of total compensation, in lieu of benefits, as is more common in the private sector. It might also be worth considering offering performance bonuses or more individualized compensation, rather than relying solely on rigid pay bands and structured rules.

It is possible that, though public employees are not ‘underpaid’, governments could still attract better talent by increasing compensation. Of course, there must be an optimality analysis in terms of talent and compensation. Higher pay can help attract a broader pool of applicants, allowing employers to be more selective. But across-the-board raises can lead to diminishing returns or reward underperformance.

The popular sentiment that government workers are systemically underpaid doesn’t hold up under scrutiny. Broad claims of underpayment overlook essential differences in the composition of public and private workforces. When accounting for education, work hours, benefits, and aptitude, most analyses find that public sector compensation is, on average, equivalent and sometimes more generous than in the private sector.

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Walking away from the California high-speed rail project would be best for taxpayers and the state

Baruch Feigenbaum — Mon, 07 Jul 2025 11:00:00 +0000

It has been nearly 17 years since voters approved California Proposition 1A, which allocated $10 billion to the California High-Speed Rail Authority to build a new high-speed rail line between Los Angeles and San Francisco. The state says “approximately $13 billion” has been invested in the rail system, but taxpayers have nothing to show for it. The high-speed rail project has been defined by mismanagement, exorbitant costs, and it’s time to pull the plug.

Current estimates say the high-speed rail system’s first segment in the Central Valley, connecting Merced and Fresno, may open in 2033, eight years from now and a quarter of a century after the 2008 Prop. 1A vote approving the project. The total estimated cost of the system is now over $100 billion.

At this point, it is almost universally agreed upon that it is doubtful, at best, that the high-speed rail line will ever reach the major metropolitan areas of Los Angeles or San Francisco. So, it is time to ask: How will the state wind down the project, and what should the California High-Speed Rail Authority do with the land it acquired?

First, the state needs to admit defeat. The Mercury News asked a team of 13 university economics professors and executives across the political spectrum if it was time to step away from the high-speed rail project. Twelve of the 13 said yes. The $9.95 billion approved in 2008 to start a rail project originally estimated to cost $33 billion was never realistic. As a Reason Foundation and Howard Jarvis Taxpayers Association study warned at that time, the original business plan underestimated costs, overestimated ridership, and lacked serious discussion of construction costs, train capacity, service levels, and possible speeds and travel times.

Further, for political reasons, the government decided that instead of the rail system running in a straight line between Los Angeles and San Francisco, or straight along I-5, it would veer off to run through multiple parts of the Central Valley. This was intended to build political support for the project in the region. But it increased the possible travel times, making them slower than promised, and almost doubled the cost. From there, the mistakes piled up. Rather than start with Los Angeles or San Francisco, places conducive to high-speed rail due to their large population, employment bases, existing urban transit service, and percentages of high-income workers, the state did the exact opposite, starting in the Central Valley.

Today, an orderly wind-down of the rail program would be most beneficial. Stopping the work is technically as easy as the California High-Speed Rail Authority ordering a pause on all construction activities. The state may have to pay some contractors a termination fee, but that is a fraction of the costs of completing the line.

California may also have to remove some of the tracks. Since the track is being built on state-owned right-of-way, the agency could contract with an outside entity to remove or sell it as is and let the new owners remove it. In the Central Valley, 44% of households are renters, often because there’s a lack of housing supply. Selling the rail project’s Central Valley land to homebuilders would allow the construction of many homes, which could help decrease housing prices across the region.

In walking away from the rail plan, the biggest cost will be that the state must raise revenue to pay off the bonds and the debt already accumulated from the project. Even if the project is canceled, the debt won’t be. But since studies show the train system would lose millions of dollars annually if it ever started operating, paying down the debt is still cheaper for taxpayers. It’s a painful choice for policymakers, but it is time to abandon California’s failed high-speed rail project.

A version of this column appeared in the Orange County Register.

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Proposed I-5 express lanes would help Southern California’s drivers and economy

Baruch Feigenbaum — Tue, 01 Jul 2025 04:01:00 +0000

Southern California continues to have some of the worst traffic congestion in the country. Drivers experience traffic delays at almost any hour and day of the week on the region’s major highways.

This gridlock is more than just a pain for drivers. It harms the state’s economy. Inrix finds traffic congestion costs the average Los Angeles driver 89 hours a year and drains $8 billion annually from the economy. The traffic also limits the number of jobs accessible to individuals. For instance, without traffic delays, workers could reach four times as many jobs as they can today.

Over the past decade, residents have been leaving California for various reasons. A 2024 poll by the University of California-Irvine found that 50% of the state’s residents are considering leaving. While traffic congestion isn’t the primary reason for fleeing, it is a contributing factor as people consider high housing prices, the employment opportunities they’ll have in their area, their commute times from places they can afford to live, and the quality of life they’ll have with those commutes.

Decades ago, California’s solution to reduce congestion was building high-occupancy vehicle (HOV) lanes, or carpool lanes. Initiated in the 1970s, the state added carpool lanes to hundreds of miles of highways, including I-5, I-405, SR 22, and SR 55.

Unfortunately, California has learned that HOV lanes suffer from the so-called Goldilocks phenomenon. They’re never quite right. Carpool lanes tend to experience too much traffic (they are too hot) at rush hour and too little traffic (they are too cold) during off-peak hours. If speeds in HOV lanes are the same as those in the congested general lanes, drivers have little incentive to carpool. When the lanes are underused, drivers stuck in traffic in the general lanes rightly view the HOV lanes as a poor use of valuable roadway space.

In recent years, the California Department of Transportation (Caltrans) has taken a smart approach to reducing congestion by converting HOV lanes to high-occupancy toll lanes. It is also constructing new toll lanes in some of the region’s busiest highway corridors. The high-occupancy toll lanes still allow carpools, vanpools, and buses to travel in them for free, while also allowing single-occupant vehicles to use them for a toll.

One of these initiatives is the proposed I-5 Managed Lanes Project, a 15.5-mile corridor between Red Hill Avenue and the Orange-Los Angeles County line. One key to the project’s likely success is a variably priced toll, which would rise and fall based on traffic congestion and ensure the volume of cars in the lanes is always just right.

Overall, the proposed express lanes would reduce congestion along the I-5 corridor. Less stop-and-go traffic also means the project would reduce emissions. The revenue generated by solo drivers using the toll lanes would be used to maintain the lanes and fund improvements in that corridor that the state doesn’t have money for otherwise.

Transportation planners have wanted to implement pricing since the 1970s. It is the best way to fund highways sustainably and address traffic congestion. With today’s all-electronic tolling technology, collection costs are low. As Orange County express lane drivers already know, motorists can establish an account, place a small transponder on their vehicles, and the tolls are automatically deducted as they pass under a gantry (sticker reading devices).

The SR 91 express lanes pioneered these lanes and have been highly successful. Ideally, Southern California would have a network of connected express lanes that drivers and businesses could use anytime they need to guarantee themselves a congestion-free trip. The proposed I-5 lanes would help reduce the travel time of emergency vehicles, allow us to get to a child’s soccer game or pick them up at daycare, and ensure we can deliver an urgent package or get to an important appointment on time.

Southern Californians need reliable, free-flowing trips that make it easier to access jobs and services and improve quality of life. Adding more express lanes can help.

A version of this column appeared in the Orange County Register.

The post Proposed I-5 express lanes would help Southern California’s drivers and economy appeared first on Reason Foundation.

How LAUSD can deal with budget deficit, declining enrollment

Aaron Garth Smith — Thu, 12 Jun 2025 10:00:00 +0000

Los Angeles Unified School District’s fiscal outlook is bleak, with a structural deficit projected to hit $1.3 billion in the 2028 fiscal year. “It’s not a rosy picture,” said LAUSD school board member Tanya Ortiz Franklin. “We are not getting more money.”

But despite what United Teachers Los Angeles and others might claim, LAUSD’s budget woes aren’t due to a lack of funding. According to the latest federal data, LAUSD received nearly $26,900 per student in fiscal year 2023. Taxpayers sending over $537,000 for each LAUSD classroom of 20 students is enough to provide a good education for kids.

Instead, LAUSD’s problem is its lavish spending. Between 2012-13 and 2024-25, the district’s enrollment plummeted by 164,000 students, yet it added over 17,000 non-teachers such as instructional aides, school counselors, and social workers. The district also doled out a 21% pay raise to teachers in 2023, knowing that billions in federal COVID-19 pandemic relief dollars were set to expire the following year.

California ranks fourth in the nation in public school spending growth since 2002, which has masked LAUSD’s financial mess. However, after two years of budget deficits and the current economic uncertainty, the state budget is projected to tighten in the coming years, and the district’s mishandling of COVID-19 reopening has accelerated its enrollment declines.

LAUSD can do a few things to get its fiscal house in order, or it risks the same fate as school districts like Oakland and San Francisco, which are on the brink of insolvency.

For starters, LAUSD needs to cut spending to sustainable levels. On average nationally, labor accounts for roughly 80-90% of typical public school budgets, so personnel reductions are unavoidable for LAUSD. This is never easy, but can be done in ways that minimize disruptions to classroom learning, such as trimming back on administration and non-instructional school staff. Regular attrition, such as retirements and resignations, can also be leveraged to minimize the need for pink slips.

LAUSD can also save money by reducing its facilities footprint. Research published by Available to All indicates that nearly half of the district’s elementary schools have experienced enrollment declines of 50% or worse in the past two decades, leaving an estimated 160,000 empty seats.

Underutilized schools are costly to maintain and spread the school district’s financial resources thin, which can result in fewer elective classes and enrichment opportunities for kids. School closures are politically challenging but necessary if LAUSD is going to get on a sustainable path.

Next, LAUSD can mitigate enrollment losses by giving families more options. States and school districts across the country are moving away from residential assignment, where students are zoned to schools and have limited or no options. Public school open enrollment gives students access to seats in schools regardless of where they live, putting parents in the driver’s seat and creating a competitive environment where public schools are incentivized to innovate, improve and attract students.

A study on LAUSD’s Zones of Choice program—a limited form of open enrollment—suggests that embracing an expansive policy would pay dividends for the school district. In their working paper on the impact of the Zones of Choice program, the University of Chicago’s Christopher Campos and the University of California-Berkeley’s Caitlin Kearns found significant gains in student achievement and college enrollment, which they attribute to increased competition.

“The evidence demonstrates that public school choice programs have the potential to improve school quality and reduce neighborhood-based disparities in educational opportunity,” the researchers conclude.

The solutions to LAUSD’s fiscal woes are straightforward—spend less, give parents choices, and focus on academics. The challenge will be overcoming objections from United Teachers of Los Angeles and other groups that oppose anything that disrupts the failing status quo. However, adopting these reforms would be a win-win for the district and students and would be worth the political fight.

A version of this column first appeared at the Los Angeles Daily News.

The post How LAUSD can deal with budget deficit, declining enrollment appeared first on Reason Foundation.

Trump’s proposed price controls on Medicare and Medicaid could reduce government spending

Jacob James Rich — Wed, 04 Jun 2025 04:01:00 +0000

President Donald Trump recently signed an executive order that seeks to reduce prescription drug prices in the United States. Trump argues that the U.S. should pay the same prices for prescription drugs as foreign nations, which currently pay half the prices of the U.S. This order is an excellent idea for reimbursements from Medicare and Medicaid. Although some center-right voices have equated Trump’s proposal to “socialist” price controls, keeping tight limits on government spending is, in fact, libertarian.

The executive order signed on May 12 seeks to reintroduce the most favored nations (MFN) reimbursement model, which was originally formalized during Trump’s first administration. The idea of MFN is to peg prescription reimbursements from the Centers for Medicare and Medicaid Services (CMS) to a basket of drug prices paid by foreign countries, which typically pay much less than the U.S. does. As I wrote for Discourse Magazine last year, the policy has tradeoffs, but it is clearly a win for limited government.

The primary issue with the current reimbursement model is that public reimbursements set private prices, not the reverse, as designed. Medicaid, Medicare Part B, and some aspects of Medicare Part D currently match private prices in the U.S. to set reimbursement rates for CMS. When introduced in 2003, the original purpose of price-matching was to introduce “market-based solutions” to federal entitlement spending. If the government must pay for some sort of service, the crafters of this policy argued that the price should avoid arbitrary negotiations and reflect the prices that prevail in the private market.

However, when payments are based on rigid formulas, they can be gamed. According to the Government Accountability Office, because “federal prices are generally based on prices paid by nonfederal purchasers such as private health insurers, manufacturers would have to raise prices to those purchasers in order to raise the federal prices.” And that’s exactly what they do. Although increasing prices to private insurers leads insurers to demand fewer of those drugs, drug manufacturers can make up for lost sales volume by selling more to public insurers at higher prices. In other words, drug manufacturers are profit-maximizing across their whole range of customers and not just private insurers. They’ll sacrifice some private-sector earnings to earn more in the aggregate.

Consider an extreme example: Suppose a manufacturer increased the price of an insulin prescription to $1 million, and only one person in the private market could afford it. Currently, insulin manufacturers make billions on the private U.S. market, so such an extreme price increase would reduce profit from the private market through lost sales. However, if Medicare purchases a million doses, even after the dramatic price increase, total revenue would increase by $1 trillion and far outstrip the company’s lost private-market earnings.

This extreme example is unlikely, but the general idea is borne out in real data: Despite overly stable rates of diabetes between 2007 and 2016, the number of insulin patients on Medicare increased from 1.6 million to 3.1 million. During this period, the list price of Lantus (insulin glargine) increased 257%, leading to a 764% increase in revenue from Medicare Part D. Consequently, between 2017 and 2019, CMS represented 59.7% of the Lantus market.

The current financial incentives disadvantage the U.S. private market and encourage patients to migrate from private to public insurance, further exacerbating the problem. As patients with private insurance increasingly cannot afford medications, they seek a public provider that will push their costs to taxpayers. Meanwhile, drug manufacturers can take advantage of this patient migration by further increasing prices after they switch to Medicare or Medicaid. Trump’s MFN plan would refocus these incentives by tying CMS prices to international markets. In that environment, the U.S. should expect private market prices to fall in addition to reimbursement rates by CMS. The bottom-up knowledge that informs prices in competitive markets is largely absent from governments, but international competition at least brings more buyers into the calculation for price-setting.

What is interesting is that Trump’s legal path to codify MFN as permanent policy is through Obamacare, which he unsuccessfully tried to repeal during his first administration. However, that failure might serve him well, because according to the added Section 1115A of the Social Security Act, Trump can test alternative pricing systems as “experiments” through the CMS Innovation Center—and make them permanent. If the experiment maintains quality while reducing costs, according to standards set by the CMS chief actuary and the secretary of the Department of Health and Human Services, the reimbursement scheme can enter rulemaking to be indefinitely expanded to the rest of CMS. Such a statute allows Trump to implement one of the most significant cost-saving measures in decades without Congress. Still, his administration must carefully follow the statute to avoid defeat through legal challenges.

If Trump can successfully separate Medicare and Medicaid reimbursement rates from prices in the U.S. private market, we should expect pharmaceutical prices in all markets to drop. Under the status quo, price increases reduce sales volume and patient access under commercial insurance and lead to more government spending on CMS. Instead of waiting to see whether pharmaceutical companies voluntarily reduce prices after his threats, Trump should immediately leverage Obamacare to implement MFN for Medicare and Medicaid reimbursements. Trump can legally do this without Congress, but he must move fast if he wishes to implement this policy by the end of his term. If MFN is not fully implemented by 2028, the next president may terminate the program.

The post Trump’s proposed price controls on Medicare and Medicaid could reduce government spending appeared first on Reason Foundation.

Federal court strikes down Oregon law requiring marijuana licensees to sign labor peace agreements

Geoffrey Lawrence — Fri, 23 May 2025 18:58:52 +0000

A federal judge has ruled that an Oregon law requiring marijuana licensees to sign labor peace agreements with a union is unconstitutional. The judge concluded that the law tries to usurp powers that are constitutionally reserved to a federal agency and that it violates the free speech rights of marijuana business owners.

A labor peace agreement generally entitles union representatives to enter the employer’s premises and attempt to organize employees into a union. In exchange, the union promises not to cause a work disruption at the employer’s business. Under federal workplace rules, if union leaders can get a majority of workers within a proposed bargaining unit to support their representation, then the union becomes the “exclusive bargaining agent” for all members in the bargaining unit. In states without Right to Work laws, like Oregon, even workers who do not consent to union membership can be required to join the union and have dues withheld from their paychecks once the union wins majority support. Union leaders can also define the “bargaining unit” to include only a subpopulation of workers at a business if they believe it increases their likelihood of success.

During the 2023 legislative session, the United Food and Commercial Workers Union (UFCW) requested that lawmakers introduce a bill that would have required any applicant for a state cannabis license or a license renewal to attest that they had signed a labor peace agreement as a condition of licensure. The resulting bill, House Bill 3183, was heard by the Oregon House Committee on Rules, where it received written testimony from 600 individuals. Of these 600, 593 were statements of support after the union organized a support campaign for its bill—substantially all of these support statements were identical except for the authors’ names. Among the seven organizations submitting testimonies opposing the bill were the Oregon Cannabis Association, Oregon Business and Industry, Americans for Prosperity, and Reason Foundation.

Reason Foundation argued that the National Labor Relations Act (NLRA) grants exclusive jurisdiction to the National Labor Relations Board (NLRB) to regulate private-sector labor relations. States can establish rules for labor relations within state and local government, but any attempt to impose unionization requirements on private entities would unconstitutionally usurp the powers of the NLRB and violate the Supremacy Clause of the U.S. Constitution. In multiple cases, federal courts had upheld this general principle and struck down requirements for a business to enter a labor peace agreement as a condition of licensure. This included a 1987 ruling by the U.S. Supreme Court that the City of Los Angeles could not force a taxicab company to sign a labor peace agreement as a condition of licensure.

Lawmakers found these arguments compelling and declined to advance HB 3183 out of committee based on the conclusion it would be preempted by the NLRA. UFCW then responded by sponsoring a version of the proposal as a ballot initiative and collected more than 160,000 signatures to qualify the measure for the 2024 ballot as Measure 119. The initiative was approved by 57% of Oregon voters.

In early 2025, two Oregon cannabis licensees—Bubble’s Hash and Ascend Dispensary—challenged the new law. Ascend Dispensary was denied a renewal of its license by the Oregon Liquor and Cannabis Commission in February 2025 because it had not entered into a labor peace agreement. Bubble’s Hash attempted to contact a union but never received a call back and feared its license would not be renewed. The plaintiffs brought suit, claiming that Measure 119 violated the federal Supremacy Clause and that its wording also violated their First Amendment rights because it restrained employers from presenting their employees with counterarguments to the claims of union leaders.

On May 20, Oregon Federal District Court Judge Michael Simon ruled that “Measure 119 is preempted by the NLRA in violation of the Supremacy Clause and violates Plaintiff’s First Amendment rights.” A significant unknown during this case was whether a federal court could grant injunctive relief to a federally illegal cannabis business. Simon addressed that issue directly, reasoning, “The NLRA does not limit its jurisdiction to ’lawful commerce’ or ’legal substance’ as some other federal laws do.” Simon cited NLRB’s existing memoranda about the operations of the cannabis industry, as well as the application of other federal laws, such as the Fair Labor Standards Act, as evidence that some federal laws still apply.

This direct ruling against labor peace agreements as a requirement for licensure of marijuana companies should give pause to other states like Michigan or New Mexico that have considered similar measures, and encourage states like California, New York, and Minnesota that have enacted similar requirements to rescind those requirements.

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New Georgia, Florida, and Missouri laws protect parents who teach their children independence

Zachary Christensen — Tue, 20 May 2025 10:00:00 +0000

This summer, Georgia, Florida, and Missouri will become the latest states on a growing list to adopt laws promoting children’s freedom to engage in healthy, independent activities, such as walking to and from school or a store on their own. These laws ensure that parents can confidently grant reasonable levels of independence to their kids without fearing government intervention.

Starting July 1, Georgia Senate Bill 110, also known as the “Reasonable Childhood Independence” bill, will go into effect. Florida’s legislature unanimously passed a similar bill, which is expected to be signed by Gov. DeSantis and go into effect this July. Missouri legislators included the same type of provisions in a consolidated child welfare-focused bill, which will go into effect in August.  

These bills establish clear exceptions to the statutory definitions of neglect and abuse in state laws, ensuring that parents cannot be penalized for allowing their children to engage in regular activities such as walking to the store, playing outdoors, or staying home alone under reasonable circumstances. State laws will still prohibit clearly harmful neglect or endangerment. However, these “reasonable childhood independence” bills reassure parents that they will not face a significant run-in with law enforcement for permitting their child to pursue healthy, independent activities.

With the passage of these bills, Georgia, Florida, and Missouri join eight other states that have adopted “Reasonable Childhood Independence” laws.

The aggressive policing of parents saw national attention last October when Reason first reported on a Georgia mother, Brittany Patterson, who was handcuffed in front of her children and taken to jail for reckless conduct—all because her 10-year-old son walked into town by himself while she was away taking another child to the doctor’s office. Patterson told the police (who had been called by a concerned neighbor) that she did not believe he was in an unsafe situation, as it was normal for him to be outside and engage in activities on his own in their small town of Mineral Bluff (pop. 370). Despite her assurances, the family was thrust into a legal battle in which the Department of Family and Children’s Services pressured Patterson to commit to a “safety plan” for her children that involved tracking their location using a phone app, an idea that the Georgia mom vehemently declined.

Patterson’s story adds to an alarmingly growing list of similar encounters between parents and local authorities about what children can and cannot do without direct adult supervision. In 2020, another mother from Georgia was arrested for allowing her 14-year-old daughter to babysit her younger siblings. In 2018, yet another Georgia mother was visited by police and child protective services because her 7-year-old rode his bike home alone from swimming practice.

Lenore Skenazy, founder of the “Free-Range Kids” movement (which advocates against helicopter parenting, arguing that it hinders children’s development), and Reason have reported on many more cases like these around the country. A 2023 study in The Journal of Pediatrics finds a steep decline in children’s independence over the last few decades and attributes increases in anxiety and depression to this trend.

These stories and the overall ambiguous enforcement of negligence and endangerment laws have a significant chilling effect on the parents who want their children to develop independence, but never know when a call to the police from a concerned neighbor could upend their lives. The Georgia, Florida, and Missouri bills address this ambiguity directly by clearly defining what will and will not be considered negligent.

Reason Foundation partnered with Let Grow (an organization at the forefront of the childhood independence movement), interest groups in the states, and the bills’ sponsors to communicate to lawmakers the clear benefits of this type of legislation, which passed in all three states with bipartisan support. Visit the Let Grow website to learn about the progress made and the laws still needed to promote childhood independence in each state.

The post New Georgia, Florida, and Missouri laws protect parents who teach their children independence appeared first on Reason Foundation.

Pension Reform News: Threats to California’s public pension reforms

Zachary Christensen — Mon, 19 May 2025 15:08:00 +0000

In This Issue:

Articles, Research & Spotlights

Threats to California Public Pension Reforms
Washington’s Unprecedented Move Will Increase Pension Costs
San Diego Needs to Manage Pension Costs
How Are Public Pension Costs Shared Between Employers and Workers?

News in Brief
Quotable Quotes
Data Highlight
Reason Foundation in the News
Contact the Pension Reform Help Desk

Articles, Research & Spotlights

California Bills Would Increase Taxpayers’ Costs and Public Pension Debt

In 2012, California lawmakers, headed by then-Gov. Jerry Brown, committed to important pension reforms that would place the state’s massive system of pensions on the path to full funding. At the time, California’s pension debt had ballooned to over $200 billion, and governments at all levels were seeing required cost increases cut into their annual budgets. The reform, known as the Public Employees’ Pension Reform Act (PEPRA), slowed the growth of ongoing costs by placing prudent limits on the benefits promised to new workers. With California pensions around 80% funded by the latest reporting, the state still has a long way to go to reach the intended endpoint of PEPRA reforms. However, lawmakers are beginning to undermine these cost-saving measures. Two bills currently under consideration, Assembly Bill 569 and Assembly Bill 1383, would remove the PEPRA provisions that protect government budgets and taxpayers from unfunded pension promises. Instead of reopening the floodgates to more pension debt, California policymakers need to stay the course on the landmark PEPRA reform.
TESTIMONY: Reason Foundation Comments on Assembly Bill 1383 – PEPRA Repeal

Washington Lawmakers Passed a Ticking Time Bomb for Pension Solvency and the State Budget

Washington is one of the best states when it comes to pension funding, but a new short-sighted bill puts years of prudent funding policies at risk. Engrossed Substitute Senate Bill 5357 seeks to reduce immediate costs on public employers by increasing the assumed rate of return for the state’s pension systems and taking a holiday on paying off existing debt. The problems with this approach are twofold: there appears to be no basis for an increase in investment returns, meaning that this change will likely increase costs in the long run and shift them to future taxpayers, and the existing debt was only one or two years from being fully paid off. In this commentary, Reason Foundation’s Ryan Frost explains that all public pensions have been downgrading their market return assumptions, and Washington would be the first to raise its assumed rate of return. Making this move may reduce costs today, but it will ultimately prove extremely costly for governments and taxpayers.

San Diego Doesn’t Have to Accept Spiraling Public Pension Costs

San Diego is unfortunately re-entering a public pension crisis, despite significant past efforts to resolve it. A court decision forcing the city to reactivate its defined benefit pension system has brought back the inherent structural weaknesses that previously led to crippling levels of public pension debt. But Reason’s Mariana Trujillo explains that escalating pension costs are not a foregone conclusion. Successful reforms in other cities and states demonstrate that these risks can be contained. They’ve achieved this by adopting risk-sharing approaches that more fairly allocate financial obligations between public employees and their employers.

Sharing Defined Benefit Pension Costs: A Survey of Public Sector Practices

Pensions generally require contributions from both employers and employees, but not all pension plans distribute these contributions equally between the two parties. New research from Reason Foundation’s Rod Crane examines the employee/employer contribution share for 230 state and locally administered public pension plans. The results show that, on average, employees tend to bear about half of the normal cost of pension benefits when debt-related costs are not included. However, with employers typically covering the remaining costs, as well as any additional debt-generated expenses, governments bear on average 75% of the total annual costs. While these results vary significantly from plan to plan, pension debts have imposed a substantial fiscal burden on government employers.

News in Brief

Partisan Politics Shapes Pension Fund Voting

Using newly mandated Securities and Exchange Commission filings, a study from Northwestern University examines how political affiliation affects the voting outcomes of U.S. public pension funds. The paper uses the political party of a state’s governor to apply a loose political leaning label for a pension board. While this method may not be a perfect predictor of a board’s political leaning, it does help identify some potentially useful correlations. When it comes to decisions on staff compensation, Democratic-aligned funds are ~five percentage points more likely to vote against management and respond strongly to proxy advisor recommendations. In contrast, data indicate that Republican-aligned funds—especially in states with anti-ESG, or environmental, social, and governance, laws like Florida and Texas—anchor their voting behavior to firm performance and are less influenced by proxy advisors. The study also finds that underfunded public pension plans are more likely to engage in share lending—potentially diluting governance influence—though this is driven by funding status, not political alignment. Read the full report here.

Quotable Quotes on Pension Reform

“Having said all of that I also don’t think we should defend things the way they’re working just because it’s the way it’s been done […] You know when I was first State Treasurer I inherited what I thought was a broken dysfunctional pension system. And I fixed it and it was super hard…all constituencies in my party and the entire legislature in Rhode Island, which was mostly Democrats, told me to leave it alone, that politics are too tough. leave it alone […] But I couldn’t…I just couldn’t sleep at night.”
—Gina Raimondo, former U.S. Secretary of Commerce and Rhode Island governor, quoted in “Raimondo Spoke to Harvard Students About Her Success in Rhode Island” GoLocal Prov News, April 14, 2025.

“First priority is to keep funding the pension system, so people have, at a minimum, their pension.”
—Rep. Mikie Sherrill (D-NJ), quoted in “What’s the potent sleeper issue in this year’s NJ governor’s race? COLAs” North Jersey, April 28, 2025.

Data Highlight

Each month, we feature a pension-related chart or infographic. This month, Reason’s Rod Crane examines how public pension costs are shared between employers and employees. Using 2023 data, the chart shows that employees cover an average of 51% of normal costs (the estimated cost of benefits earned) but only 25% of total costs when unfunded liabilities are included. The full commentary is here.

Reason Foundation in the News

“Public pension systems should keep politics of all kinds out of their investments to serve their core duty of maximizing investment returns to provide workers with the retirement benefits they’ve been promised while minimizing financial risks for taxpayers. The modern guardrails and reporting standards in this bill can significantly strengthen these vital systems.”
— Zachary Christensen, Pension Integrity Project Managing Director, quoted in “Runestad introduces bill to ban ‘financial DEI’ investing for Michigan’s public pension funds” Michigan Senate Republicans, May 8, 2025.

“The benefit changes back then helped bend the cost and liability curves and built in some risk protections around new hires, but they didn’t fundamentally pour a bunch of money in to solve the current underfunding. It was a Phase 1 reform and then their leadership team left and they stopped pushing additional phases.”
— Len Gilroy, Reason Vice President of Government Reform, quoted in “New Mexico’s Pensions Remain Problematic” Rio Grande Foundation, May 12, 2025.

“Connecticut still has $40 billion in unfunded pension liabilities and another $20 billion in unfunded retiree healthcare liabilities to pay—the second highest in the country in per capita terms, equivalent to $16k per resident. Interest on that debt compounds at 6.9% annually. Any pause or reduction in pension contributions carries long-term costs.”
— Mariana Trujillo, Reason Foundation Policy Analyst, “Opinion: Why Connecticut Risks Return to Fiscal Chaos,” Hartford Courant, May 8, 2025.

The post Pension Reform News: Threats to California’s public pension reforms appeared first on Reason Foundation.

California bills would increase taxpayers’ costs and public pension debt

Zachary Christensen — Thu, 08 May 2025 04:01:00 +0000

Recent stock market volatility and shaky economic conditions should remind policymakers that there are many scenarios where California’s public pension debt could grow significantly in the years ahead. California’s state-run pension plans already had $285 billion in unfunded liabilities at the end of 2023, according to Reason Foundation research, so it’s incredibly worrying to see lawmakers considering undoing pension reforms that save tens of billions of dollars so they can dole out unaffordable and unnecessary pension increases to government workers.

The 2012 Public Employees’ Pension Reform Act (PEPRA), signed by Gov. Jerry Brown, improved the long-term stability of the state’s public pension plans, helping slow runaway costs that had become an insurmountable burden on state and local budgets.

However, before the full savings from these reforms have been realized, some lawmakers, partnering with public labor unions, are trying to undo them. These reversals would thrust California back into the same pension funding quagmire it was in over a decade ago.

At the time of the 2012 reform, governments at all levels were reeling from exploding public pension costs, caused mainly by irresponsible and unfunded benefit increases granted around the turn of the century. State policymakers needed to slow the growth of pension costs, which they did by modifying the benefits promised to future workers. Specifically, the law limited the size of retirement benefits that could be promised to prospective hires, increased the age at which new hires could retire, and set a minimum for the amount employees must contribute.

The impressive cost savings from the reforms are undeniable. The California Public Employees’ Retirement System, CalPERS—the country’s largest public pension plan—estimates that PEPRA saved its employers, i.e., taxpayers, up to $5 billion over the last decade. Taxpayers are supposed to see even more savings over the next 10 years. CalPERS estimates PEPRA will reduce taxpayers’ costs by $20 billion to $25 billion. However, the reforms must remain in place to realize these savings.

Unfortunately, two current proposals in the state legislature threaten to derail the pension reforms and increase taxpayer costs. Assembly Bill 569 would allow local governments to circumvent the benefit limits set by PEPRA, opening the gates to the same costly and unfunded pension increases that created the state’s massive public pension debt in the first place.

Assembly Bill 1383 would cause even more harm to taxpayers and PEPRA by undoing limits on pension benefit increases, retirement age adjustments, and contribution requirements for all public safety members enrolled in CalPERS. The bill aims to give police and firefighters costly pre-2012 pension benefits, which have already proved financially untenable for taxpayers and governments.

The proposals would worsen California’s pension funding problems. While significant funding progress has been made since the 2012 reforms—state pensions have improved from 71 percent funded to nearly 80 percent funded— the state’s unfunded pension liabilities jumped above $244 billion in 2009 and haven’t come back down.

Supporters of these new bills to increase pension benefits argue they’re needed to help recruit and retain public workers. However, there is no evidence that handing out costly benefits increases will do that. Surveys of incoming and outgoing public workers consistently demonstrate that pensions are not among the top considerations for new hires or those leaving government jobs. Public workers say they are far more interested in higher salaries, better workplace conditions, and work-life balance, not more pension benefits.

Opening the door for pension cost increases and more debt, while the state is $285 billion short of having the money needed to pay for the retirement promises it has already made to public workers, would be highly irresponsible to government employees and the taxpayers who will ultimately foot the bill.

Maintaining the PEPRA reforms is part of the state’s best hope for fully funding public pension benefits and eliminating debt. Unwisely unwinding PEPRA’s successful pension reforms before the full funding goal is realized would increase unfunded pension liabilities and cost state taxpayers tens of billions in the years ahead.

A version of this column appeared in the Los Angeles Daily News.

The post California bills would increase taxpayers’ costs and public pension debt appeared first on Reason Foundation.

Government Reform Archives

Report: Cities have $1.4 trillion in debt

City governments’ long-term debt

City government pension debt

City government OPEB debt

City governments’ outstanding bonded debt

Related:

Report: County governments have $757 billion in debt

Long-term debt

County pension debt

Other post-employment benefits debt

Outstanding bonded debt

Related:

California’s AI law works by staying narrow

Concerns with SB 53

Looking beyond California: State-based AI best practices in lieu of a federal standard

Report ranks every state’s debt, from California’s $497 billion to South Dakota’s $2 billion

State governments’ long-term debt

State public pension debt

Other post-employment benefits debt

State governments’ outstanding bonded debt

Report: State and local governments have $6.1 trillion in debt

Report: State and local governments have $6.1 trillion in debt

State and local government long-term debt

State and local government pension debt

State and local government OPEB debt

State and local outstanding bonded debt

Report ranks every state’s total debt, from California’s $497 billion to South Dakota’s $2 billion

Ohio lawmakers consider bill to promote an independent childhood

LAUSD celebrates mediocre test scores

How the One Big Beautiful Bill Act taxes gamblers on money they didn’t keep

Debtor Nation 2025

Why the national debt matters

How we got here

Who holds the federal debt?

Where does the federal government spend money?

Conclusion

Public employees are not underpaid

Average salaries are higher in the public sector

But public and private sector employees are not the same

Adjusted public and private sector salary comparison

You get what you pay for

Walking away from the California high-speed rail project would be best for taxpayers and the state

Proposed I-5 express lanes would help Southern California’s drivers and economy

How LAUSD can deal with budget deficit, declining enrollment

Trump’s proposed price controls on Medicare and Medicaid could reduce government spending

Federal court strikes down Oregon law requiring marijuana licensees to sign labor peace agreements

New Georgia, Florida, and Missouri laws protect parents who teach their children independence

Pension Reform News: Threats to California’s public pension reforms

California bills would increase taxpayers’ costs and public pension debt