Thursday, November 4, 2010

Burgess: Pension is Time Bomb

Even before the head of the Pennsylvania Municipal Retirement System officially presents the numbers this afternoon to council, Pittsburgh Councilman Ricky Burgess was quoting the report as calling for 120 million dollar annual minimum payments. He says the pension fund is a “ticking time bomb that is going to go off.” The city must bring the pension program up to 50% funded by the end of the year to avoid a state takeover. Right now the fund is at about 27% of its obligation. Burgess says they did not start the countdown but they have to deal with it. “Previous administrations, previous councils, have been aware that this bomb existed, but it has been mostly ignored." Burgess says the council’s actions over the next few weeks will be “recorded in history” because they can no longer avoid the tough decisions.
This year’s budget calls for the city to make a $45 million payment into the pension fund. An additional $11 million is expected to be added from budget surpluses. Burgess says if the city must begin to make the higher payments it will lead to bankruptcy. “We will be forced to liquidate assets without any choices." The councilman then headed off the argument that maybe the state would help by noting that the Republican lawmakers in Harrisburg held a news conference yesterday stating now that they have taken control of both chambers and the governor’s mansion there will be major budget cuts. They also noted that the state might have to sell some of its assets. Burgess the cited court records that show other municipalities faced with insolvency being forced to break union contracts. “We will no longer honor our union contracts. We will have to cut services. That means we will have less streets paved, less houses torn down, more vacant houses, more vacant yards not being cut.” Burgess says the only other option is skyrocketing property taxes.

Councilman Bill Peduto says the $120 million dollar number is slightly inflated because the PMRS would not accept some of the pension funds assets. He says once they are sold they can be folded into the pension, reducing the average payment. Peduto has also noted that the payments will ramp up over time and the city’s debt load will reduce over time helping to cover the costs. Others have suggested that the city increase parking rates to help offset the higher pension payments.
Council will get a full explanation of the pension obligations under a state takeover this afternoon.

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