Despite a widespread belief among government officials that public pensions are the biggest fiscal challenge facing states and local governments, infrastructure needs are actually a greater concern. That’s the argument Mark Funkhouser makes in “Why the Fiscal Issue That Matters Most Isn’t Pensions” in the June issue of Governing magazine.

Infrastructure needs are more significant than pension challenges in three ways:

• An estimate of the country’s infrastructure deficit ($3.6 trillion) is larger than state and local governments’ defined-benefit pension underfunding (between $2 and $3 trillion).
• Infrastructure issues are pervasive from the Southwest to Northeast and everywhere in between, while many pension plans are well-funded.
• The consequences of failing infrastructure are dire, including loss of life, property and economic competiveness.

Policymakers may be overly concerned about pension funding in part because criticizing pensions fits with an ideological agenda. Cutting pension benefits and shifting payments from employers to employees may also be easier than finding new money for infrastructure spending, Funkhouser suggests.

As Funkhouser concludes, “The issues confronting pensions, while not trivial, are manageable. But…you cannot repeal the laws of physics.”