Thursday, December 30, 2010

State: City Pension Bailout Not a Done Deal

Pittsburgh Council will vote this afternoon on whether to override Mayor Luke Ravenstahl's veto of the latest plan to bolster the city's pension fund and avert a state takeover of the fund January 1. But Pennsylvania Public Employees Retirement Commission Executive Director James McAneny says the plan still needs to be approved by the state.

If the city's pension fails to cover 50% of its obligation to workers and retirees by midnight Friday, the state will take control of the fund. The fund is currently at 29.3%. Council and the mayor have sought to avoid that outcome because it will mean a rigid payment schedule for the city that could spell higher taxes and reduced services for residents. Wednesday Council voted 7-2 to "irrevocably" dedicate $414.7 million in parking tax revenues over the next 31 years...or about 14 million a year... for the pension fund." Ravenstahl quickly vetoed that measure, saying it was flawed and risky. McAneny agrees that it's risky - "There's a very good chance of over-estimating the value of a future revenue stream. One thing that I've tried to warn the city about repeatedly is that they take care they don't dedicate a revenue stream for the next 30 years and then not have it be sufficient to get to the 50% funded ratio."

He says he has neither seen, nor approved city council's latest plan, "I've never been able to make a commitment as to what the value of a future revenue stream would be." McAneny says when the clock strikes midnight Friday the city can't do anything more to try and right the pension fund and the state will begin to analyze whether council's latest plan will in fact bail out the pension. In the rush to find a solution, McAneney says it should be noted that this problem was a long time in the making, and that the city should have been putting more money into the pension all along, "that's why they're in the position they're in."

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