City Officials Rest Easy

Here’s what the most recent actuarial valuation (reflecting data as of January 1, 2009) shows for the health of the City’s pension funds in aggregate (the police, fire, and non-uniformed funds): $334 million in assets for $989 million in liabilities. That translates into a shortfall of $655 million and a funded ratio of 34%. City officials are somewhat relieved that the liabilities did not top $1 billion, which means the unfunded liability total was about $50 million less than expected.

Don’t pop the champagne corks yet.

Comparing these numbers to the previous actuarial valuation as of January 1, 2007 reveals that assets have fallen by $41 million, liabilities have grown $90 million, and thus the unfunded liability has grown by $131 million. The funded ratio was 42% then.

Of course, the real picture could be worse since the valuation reflects the values from the start of 2009. Let’s assume that the 2009 valuation has held as of now. What does that mean for the parking garage lease plan? Recall that the City has to demonstrate that the pensions are 50% funded in order to avoid a state takeover of the funds. With $989 million in liabilities, the lease plan would have to net $160 million and, when combined with the $334 million in reported assets, the funded ratio would attain the 50% target ($494 million/$989 million).

The 50% level would save Pittsburgh from a takeover, but it would not change the fact that Pittsburgh’s pensions are still among the lowest funded in the country. In 2008 the Center for State and Local Government Excellence ranked Pittsburgh 82nd out of 84 locally administered pension plans, and found only two others with a funded ratio of 50% or lower.