Wednesday, February 07, 2007

and again.. pensions

For those who wonder why Pittsburgh City Council is in Harrisburg asking (pleading?) for help with city pension funding.. the answer is a $1 Billion dollars in pension liability coming due. The City of Pittsburgh supports 3 major pension funds for city Police, Fire and General Municipal workers. The amount of money in each of those pension funds is estimated to be at 33%, 57% and 47%, respectively, of the amounts they need to be solvent.

The different funding levels for the 3 different plans is both curious and problematic. The lowest funded pension plan is for city police, and when it gets closer to zero it will essentially become a pay-as-you-go pension plan. The city just won't have the money to pay that. If you have problems sleeping you can also read the entire actuarial report for the 3 funds: 1) Police, 2) Fire and 3) General Municipal. Cheaper than Ambien I promise.

Now I hear many say the whole pension crisis is due to some extravagant benefit level the city pensioners receive. The average general municipal pensioner in Pittsburgh receives less than $800 per month, many get even less. Police and fire pensions average a little higher, but many still get less than $1k/month. So if you consider that extravagant it's your call, but for the most part the pension funding crisis is due to the city just not putting money away for this expense when they should have over the last couple decades. I think many extrapolate what they hear from other industries or other cities (or even in Harrisburg) where average pensions are 2-3 or more times that. Not here.

but this all has been known for years (decades?).. why is city council getting overly concerned now? Part of annual required payments into the funds are paid by the state and part by the city. For reasons I have explained in the past, the state's contribution to the city has been stagnant and the city's required contribution is rising fast.

and no, this is not even beginning to talk about health care costs which are a separate issue... this is just for actual pension checks. According to the Government Accounting Standards Board, large cities should be doing an actuarial accounting of future health care liability. Anyone ask the city if they are going to comply? The answer I read here is a clear NO. but that is probably another $250-300mil that the city will owe.... but for those struggling to get interested in the city controller race, it's a great question for the ever-growing field of candidates.

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