Tuesday, April 10, 2007

pension summitry

The mayor has called a summit of 17 cities in Pennsylvania for this Thursday to discuss the growing pension funding dilemma.

Here is an relevant column in Governing talking about a report from the Illinois Civic Federation on the topic of public pensions. One of their suggestions, freeze benefits or increase contributions for pension funds that are less than 90% funded. I just mention that because it's amazing anyone is considering 90% as a benchmark for public pension systems anywhere?? For the city of Pittsburgh the major pension funds are funded at between 30 and 50% at best. The Trib article linked above seems to assume the total liability of the city pension obligations has stayed the same since Jan 2005 when the last actuarial reports came out. That seems unlikely. Here is the trend for the total liability of the three major city pension funds.
Total Obligation of 3 major city pension systems

Anyone discern a trend? As bad as that seems, the more immediate problem isn't so much the pension underfunding as much as the trend for the city's required contribution each year. Because state contributions are based on a municipalities current headcount of workers, the drawdown of city workers since 2003 has depressed the amount that would be coming from the state as well as depressed the contributions of active city workers into the funds. The result has been a big jump in the city's required contribution. In 2003 the city's calculated contribution was $2.9 mil mil, but in 2005 it jumped to $14.2 mil.

I have pointed this out before, but for those who need help sleeping. Here are the most recent actuarial reports for the city: 1) Police, 2) Fire and 3) General Municipal pension funds. It's a little curious to me why the Police Pension fund is so much less funded than either the general municipal or fire pension systems. But something not talked about is that with 375 million in the bank as it were, the city pension systems would essentially be broke right now if not for the bonds floated in the 1990's to recapitalize the funds.


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