Two days before this past Christmas a letter was hand-delivered to the Mayor noting that the 2012 budget "fail[ed] to reflect the conditions for approval that the ICA has required". Those conditions were threefold: first, to adopt a strategic capital plan, which would be important given the fact that the City has not issued debt for infrastructure projects but soon anticipates doing so, second, to create a dedicated fund for other post-employment benefits, something first required in the amended Act 47 plan from 2009, and the City’s share of the pension fund payment ($60 million) for 2012.
In addition the letter states that the City amended the budget by increasing Council staff salaries and creating a dedicated fund for Council mailings by "apparently…diminishing a workers compensation fund".
Could it be more ironic that-following the City’s 2007 request to get out of oversight and an amended recovery plan that stated "get focused on legacy costs like debt, pensions, and workers comp-the City comes late with plans and funds related to these items and siphons money off of one of them to bolster Council operations?
On the heels of a Citywide referendum that approved a tax hike for libraries (1/4 of a mill) and the 1 mill increase by County Council Tuesday night, residents of the Pittsburgh Public School District (City of Pittsburgh and Borough of Mt. Oliver) can be relieved that the 2012 budget contains no tax increase. But they should be concerned that the trends that have plagued the District show no signs of abating.
Enrollment continues to fall; it stands at 25,031 for the 2011-12 school year but the District is planning for additional school closings, realignment, and possible additional layoffs in 2012. And the same legacy cost issues that have impacted other local governments in the region are present in the District. The superintendent’s budget message points out that "despite [headcount] reductions…benefits and pension costs will rise by $31 million over the next four years. From 2004 through 2012, our pension cost per employee increased by 82 percent.." Health care costs fared no better, and both outpaced inflation.
The budget has $508 million in revenues and $529 million in expenditures, requiring the District to dip into the fund balance. It is interesting to note two facts on the revenue side of the equation: first, the local-to-state split in funding is 53% to 46% and second, based on the assessed value of real estate characteristics outlined in the budget (taken from the state equalization board) residential value accounts for 57% of total assessed value. Of the 43 districts in Allegheny County, nine others besides Pittsburgh have less than 60% of their total assessed value represented by residential property.
After presenting the 2012 budget to Council, the Mayor raised the idea that the City is ready to be released from state oversight. Now whether the Mayor meant Act 47, or the oversight board, or both is not clear from the newspaper article or the Mayor’s press release (which does not mention the request). The Mayor’s spokesperson had stated the City could function on its own in mid-October. Plenty of elected officials, both from the state and the City, weighed in on the Mayor’s statement.
Recall that the City formally petitioned DCED for removal from Act 47, a petition that was denied in July of 2008. There was a chance that the state was moving to eradicate the oversight board early in its tenure, but it is still in place and several new appointments have been made to the board.
In denying the Act 47 request, the DCED Secretary at the time noted the City had several issues to address:
- Debt service requirements that exceed 20 percent of the City’s operating budget and will not decline until 2018
- Unfunded pension liability currently at $467 million
- OPEB liability that ranges from $220 million to $320 million
- Workers’ compensation liabilities have remained high and are projected to reach $24.7 million by 2012
So what do things look like now, more than three years later? We know that debt service is still around 20% of the budget ($87 million for 2012); as a result of the pension bailout and asset infusion unfunded pension liabilities stand at $381 million; OPEB liabilities are now $488 million; and workers’ comp costs are down slightly, at $21 million for 2012.
Following closely behind the oversight board’s approval of the City’s 2012 updated budget, which included putting an additional $10 million toward pensions and bringing next year’s total contribution from the City, state (including the state’s special allocation of $10 million), and employees to $65 million, a chorus of voices-including the City Controller, the City Finance Director, and the Act 47 coordinator-are saying that now is the time to put together a long-term fix for the City’s pension problem.