Wednesday, June 20, 2007
Municipal Pension Fix Likely a Long Way Off
The Mayor of Pittsburgh spoke once again on the idea of merging the state’s 3,100-plus municipal pension plans into one statewide system at a conference of the PA League of Cities. Understanding that Pittsburgh’s three separate pension plans are woefully underfunded to the tune of $470 million, the Mayor is looking for a solution. Certainly none has been provided by either of the City’s two overseers.
Maybe the state will retool the distribution of state aid. Maybe the state will call for a merger and make municipal pensions like the state retiree or school employee system.
It is true that aid declines as the City employment headcount declines. Bu that makes sense in that future liability accruals are reduced as employment is reduced. And the state aid decrease does not excuse the fact that it was the City that made overly generous promises to its employees. Those costs should not be pushed onto the rest of the state.
And then there is this: the state’s Budget Secretary noted that the Commonwealth has to address its own looming pension shortfall, which demands a $1.5 billion balloon payment in five years, before it can help fix the municipal retirement system. On top of that will be the school pension solution, which will see employer contributions jump in 2013. That puts the municipal plans at the bottom of the totem pole of reform actions.
The Mayor and leaders in the state’s other cities might want to look at some of the solutions we proposed in our report on local pensions earlier this year. This includes putting all new employees into a defined contribution plan, selling the liquor stores to provide for a source of revenue, or setting up something like the Pension Benefit Guaranty Corporation.
Maybe the state will retool the distribution of state aid. Maybe the state will call for a merger and make municipal pensions like the state retiree or school employee system.
It is true that aid declines as the City employment headcount declines. Bu that makes sense in that future liability accruals are reduced as employment is reduced. And the state aid decrease does not excuse the fact that it was the City that made overly generous promises to its employees. Those costs should not be pushed onto the rest of the state.
And then there is this: the state’s Budget Secretary noted that the Commonwealth has to address its own looming pension shortfall, which demands a $1.5 billion balloon payment in five years, before it can help fix the municipal retirement system. On top of that will be the school pension solution, which will see employer contributions jump in 2013. That puts the municipal plans at the bottom of the totem pole of reform actions.
The Mayor and leaders in the state’s other cities might want to look at some of the solutions we proposed in our report on local pensions earlier this year. This includes putting all new employees into a defined contribution plan, selling the liquor stores to provide for a source of revenue, or setting up something like the Pension Benefit Guaranty Corporation.
