Tag Archives: PERC

When will elected officials tackle the building pension crisis? According to researchers at the American Enterprise Institute "it is only when the gloom of crisis finally descends that public officials will muster the will to address the mismatch between [pension] promises and resources".

Obviously in Pennsylvania that gloom arrives at different times-with two statewide systems (one for teachers, one for state workers) and more than 3,000 local government plans-depending on the funding status and weight of unfunded liabilities. It could be easily argued that the gloom is on Pittsburgh. Just yesterday the Council approved its Act 47 amendment that calls for an additional $10-$14 million per year to be put toward pensions. Philadelphia is at that point as well with unfunded liabilities of close to $4 billion and a funded ratio of 55% in 2008, only besting Pittsburgh (29%) and Atlanta (53% in 2007) according to a Pew Charitable Trust study of the issue. The majority of other local plans entered the economic downturn with healthy funded ratios. Now the Public Employee Retirement Commission is trying to build consensus for municipal reform, including an option to shuttle the most troubled municipal plans to state control and oversight.

The day of reckoning for the statewide systems in Pennsylvania is closer to 2012 when rate spikes are expected to take hold. A presentation made to the Senate Finance Committee last month showed that the employer (school district) pension contribution is supposed to grow from 4.75% in 2011 to 16.40% in 2012. The companion state retiree system shows employer contribution rising from 8.79% in 2011 to 28.30% in 2012.

That same AEI study notes an expert as saying "once granted, a pension is a contractual obligation of the employer" and taxpayers will be on the hook for any shortfall. Not a reassuring situation for a state contemplating tax hikes or a region where its largest County just added two new taxes and its largest City is looking for a variety of tax and fee options.