Was part of the motivation for avoiding a state takeover of the City’s pensions to preserve the jobs of the employees that handle those pensions? We may never know for sure, but a newspaper article over the weekend certainly had to raise some questions about that possibility.
To begin with, the piece pointed out that with twelve total employees, administrative costs, and separate attorneys the City’s pension system (a system that contains three separate plans for police, fire, and non-uniformed employees) is much larger than the office function at Allegheny County, a system with 7,300 actives to Pittsburgh’s 3,300 actives.
The City Controller, who was instrumental in putting together an alternative aimed at avoiding a state takeover, was more pointed in his view of the matter: "I don’t know that we need four lawyers [advising on the city pensions]…That doesn’t make a lot of sense to me…The city’s [pension] situation is so serious that every effort to contain costs has to be looked at. We’ve got to have more consolidation of those staffs."
If the City is to be taken over-it is still a possibility once the actuarial numbers of the New Year’s Eve plan are put together that the "infusion of value" did not meet the minimum 50% funded ratio-it will end up going to the PA Municipal Retirement System (PMRS). PMRS has 26 total staff members administering over 900 plans from various municipalities with 8,400 active employees. The total assets are valued at $1.5 billion. They would assume control over the City’s three pension plans with $339 million in assets. While the head of Pittsburgh’s fire union (who is also on the City’s pension board) intimated that the City pensions require attention seven days a week, a PMRS staffer covers 323 actives while a Pittsburgh pension employee covers 277. The administrative cost comparison, as much as can be derived from the article and PMRS financial statements, is slightly in favor of the latter at $380 per active to $391 per active in Pittsburgh.
Nevertheless, PMRS and the state will have some time to think about how they could handle Pittsburgh’s plans should that come to pass. But they won’t get any help from the City, since the article noted "the city’s Comprehensive Municipal Pension Trust Fund board…met [last week] but did not release a year-end balance for the fund, for fear that any figures released might be used to justify a state takeover of the city’s pensions". Whose best interests are at heart in this scenario?
As the proverbial clock moved close to midnight on December 31st Pittsburgh City Council finalized a plan it believed would be sufficient to avoid a state takeover of the City’s underfunded pensions. Instead of a long term lease of assets that would have produced a lump sum of upfront cash for the pensions, the Council’s plan promises to dedicate thirty years of parking tax revenues along with what the City already pays in as its minimum obligation to the pension system.
After witnessing the desperation of City Council this week, we have towonder what can be so frightening about the state takeover of thepensions. If they have to boost annual contributions from the parking tax to $27 millionto satisfy the 50 percent requirement, then in addition the contributionthey must make to continue improving the funding ratio and to keep upwith payments from the funds will boost annual contributions to $100million. That is the number Council is so afraid of if the state takes over the funds.
In effect, the Council is passing a bill requiring the City tospend what it would have to spend if it were taken over by the state.Something the Cityshould have done years ago without the threat of atakeover.
The question remains: the bill being passed is not anenforceable contract. What is to prevent a new Council three yearsdown the road from reneging on the obligation by passing a new law orrepealing the bill about to be passed? And that goes to the firstquestion about what Council members are so afraid of in a statetakeover. Under state management the higher payments would have to bemade. Not under state control, the City would start wriggling to getoff the hook.
Council’s first plan of the week was to generate $900 million over30 years while the latest plan is expected to produce $700 million.The executive director of PERC has indicated he was not confident that Council’s $900 million plan would be adequate. What will the executive director now say to this latest scheme Council expects to vote onat 11PM on December 31st? Why should the state have any confidence inCouncil’s promises?
On the subject of City Council’s latest attempt to craft a pension solution that averts a state takeover in two days by using dedicated parking meter revenue over the next three decades, there are dueling news reports over just how supportive the head of the Public Employee Retirement Commission (PERC) was of the plan.
One print report stated "council members last week consulted the state about dedicating future revenue streams to the fund. The concept won approval of [the] executive director of the state Public Employee Retirement Commission, the agency that enforces pension laws."
Another print report quoted the director as saying "It’s too late…even if they got $500 million next year, it wouldn’t change the takeover, unless the General Assembly changes the law." The law in question is Act 44 of 2009, the statute that dealt with municipal pensions and contains the specialized provisions for Pittsburgh.
Obviously there is a big difference between the original lease proposal, which would have given an up-front lump sum payment to show up on the audited books of the pension funds, and a dedicated revenue stream over a thirty year time period. There is apparently a big difference as to how convinced one official is of carrying out the latter plan.
“A City of the Second Class that is determined to be in Level III distress based upon the required actuarial valuation reports for a plan year beginning on January 1, 2011, shall transfer all existing benefit plans established by the City to the Pennsylvania Municipal Retirement Board solely for administration…Pension benefits and eligibility requirements shall continue to be subject to collective bargaining”-Act 44 of 2009, Section 902C
As the Mayor takes his case for leasing the parking garages, lots, and meters to the public he has to wonder if at least one of the interested companies will see sufficient earnings potential from a long term lease to justify an offer of $300 million the City hopes to get. This is the amount needed to cover the Parking Authority’s outstanding bond debt of about $100 million and provide $200 million for the City’s pension funds.