Friday, February 19, 2010

Council Gets Pension Update

Pittsburgh City Council today held the first of five post agenda meetings and hearings on the city's ongoing underfunded pension plan. The city's pension plan is funded at only about 29% of its obligations to retirees and current employees.
Under legislation approved and signed into law in September, Pittsburgh was given a 2 year reprieve to get that amount up to 50%. To bolster the fund, Mayor Luke Ravenstahl has proposed leasing city-owned parking garages and using that money to reach the 50% threshold.
At Thursday's meeting, Scott Kunka, the city's director of finance, Bill Urbanic, council's budget director, City Controller Michael Lamb and Jim Roberts of the Act 47 management team. Urbanic says the city's pension fund has never been near 100% funded
"in 1999-2000 it came close to 70% funded but that was short-lived because the bubble blew up in the technology market."
Urbanic says state financial assistance for municipal pensions is based on the number of current employees and not retirees, and that hurts Pittsburgh which has been downsizing its workforce. Urbanic says you need enough money coming in from employee contributions to be able to pay out the pensions to the retirees.
Urbanic told council that a single pension system is needed in the state and that other states have successfully implemented such a program.
Controller Lamb told council that changes should be made to the state's funding formula. He says that he doesn't want "to knock out" any municipalities that receive state help funding pensions even if they are well to do. So he suggests that municipalities currently receiving state help be frozen at the current figure and that the truly distressed communities (like Pittsburgh) receive the additional money that is coming into the state pool of funds.
Act 47 Manager Jim Roberts says the city is increasing its contributions toward its pension obligations and believes it will continue to do so.
Council's finance chair Bill Peduto says upcoming hearings will include testimony from state officials, national pension experts, and representatives from Chicago who will discuss their experiences in leasing parking assets.

Governor Ed Rendell has signed pension reform legislation into law. The State Senate approved the measure after many of the reforms the Senate inserted earlier were removed by the House.
The legislation gives the city of Pittsburgh a 2 year reprieve before state takeover of its pension plan. At the request of Mayor Luke Ravenstahl, state lawmakers gave the city 2 years to bolster its pension plan which is only funded at 28% of its obligations to retirees and current employees. City Council President Doug Shields is a member of the Pittsburgh Municipal Pension Board says this will give officials time to seek bids and then lease city-owned parking garages. The mayor wants to use that revenue to help bring the city to the 50% threshold of funding the pension system.
The legislation also allows Philadelphia to raise its sales tax to 8% for 5 years to address a budget deficit and to improve its pension fund balance.
The Senate okayed the bill even though the House stripped provisions that had been approved by the Senate that would freeze pensions and change the way new hires would contribute to a pension plan.

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