City’s Pension Funded Ratio Hits 60%
A student bringing home a 60% grade on an exam is probably would not elicit a celebration, unless the student was previously scoring well below that. Certainly there would be an expectation of even more improvement from the 60%.
The grade discussed today is that of the City of Pittsburgh’s aggregate pension funding ratio, measured by taking the actuarial assets divided by the actuarial liabilities to derive a percentage, which, as described in the press release on the funded ratio it “…is a tool for judging the health of such funds”. And by that measure in 2010 under the Act 44 distress scoring framework established by the General Assembly, Pittsburgh was in bad shape with a 34% funded ratio and a label of “severe distress”. Thus the press release’s noting “City pension fund at highest funding ratio in seven years”. Whether that level is fleeting will have to be seen–the Finance Director attributed the status to the stock portfolio–and noted “…any decline in the stock market would probably pull down that funded ratio”.
Our readers are familiar with the history at that point and forward from 2010: the state told Pittsburgh to get the pensions to a funded ratio above 50% or have the plans transferred to the administration of the PA Municipal Retirement System; there was a proposal to have a long-term lease of the garages, lots, and meters owned by the Parking Authority, a proposal that was replaced with a 30 year “infusion of value” involving a stream of parking tax revenue. When we wrote about the Auditor General’s most recent audit of the city’s pensions the audited funded ratio as of January 1, 2015 was 57%. As measured by the distress framework. Pittsburgh is in “moderate distress”.
As time flies, next year marks the first when the parking tax revenue is to double from what has currently been contributed ($13 million rises to $26 million). Though the 2018 budget has yet to be proposed, the initial 2010 value infusion scenario projected a payment into the pension system of $93 million in 2018, up from $79 million this year. The 2017 budget put this year’s total contribution at $70.4 million (total employee benefits under the Finance Department totaled $76.1 million, which includes items other than pensions). As we noted earlier this year the City’s pension board also lowered the assumed rate of return which entails putting more money into the system.