Tuesday, June 23, 2009
At a gathering of municipal pension fund managers and political leaders Allegheny County Executive Dan Onorato urged them to consider merging their funds. Those mergers could be made on a fund-by-fund basis but Onorato is pushing for a state-run pension plan that would be open to all municipalities. Such a plan would require action in the he state legislature but Onorato says now is the time to act. He says there are more than 3,100 pension funds in the state and most have 10 or fewer enrollees. Nearly all of them are underfunded. Onorato says it is important for lawmakers in Harrisburg to understand that this is not just a big city issue. Huge underfunded liability levels in Pittsburgh and Philadelphia have grabbed most of the headlines and therefore the attention of lawmakers. He says the issue impacts cities and counties of all sizes. The executive says the money saved through consolidation will go a long way to filling the gap between fund levels and liabilities over time. Onorato says it would be optional to enter into the fund but he sees it as a “carrot and a stick” situation. He says if a pension fund is struggling and is looking to the state for help it is very unlikely that a financial bail out will be coming but if the municipality is willing to give up local control it can enter into the larger pool to realize some cost savings and gain long term stability. Onorato says a merged fund could be very powerful. Combined, the municipal funds in the state hold 14 billion dollars in assets. Among those giving financial rather than political advise to those gathered today was Michael Patalsky of Wilshire Associates. He says the most important thing to do it to understand that we are coming out of a “one in one hundred year flood and you should not set up your fund to take advantage of a one in one hundred year flood” because that is behind us. Patalsky says it will be very hard for funds to invest their way out of this situation and most municipalities do not have the money to dump into the funds. The alternative is to try to take the long-term approach.