Friday, March 19, 2010

Pontificating Pensions for Posterity

So there is a little spat over whether and how the sale of the parking assets will save the pension fund by getting it, hopefully, over a 50% funding ratio. Will it?

Something to ponder.........

From 1996 you can read 75 pages of all the financial calculations you want to chomp on (or not) leading to a simple conclusion that the then-proposed $300 million* pension bond of the 1990's will solve all the pension problems when projected out into the future.

That all worked out well.

* equivalent to ~$414 million in today's dollars.


Anonymous MH said...

Not that I'm usually one to defend Pittsburgh's leadership in 1996, but didn't the state kind of raise the bar (i.e. increase the pension benefits) between 1996 and 2010.

Friday, March 19, 2010 12:20:00 PM  
Anonymous MH said...

Not that it would have worked otherwise.

Friday, March 19, 2010 12:43:00 PM  
Anonymous johnnyg said...

I realize that you experts continually show me how naive I am about all of this, but here goeth I again.

As I understand it, if this plan works perfectly and the garages bring in enough assets, the pension fund will be 50% funded, in 2007 dollars. Right? And the garages are about the last major asset left. Right? I mean, the water plant is gone; the asphalt plant is gone.

So, isn't the upshot that all this maneouvering does is postpone the day of reckoning? I mean, isn't the city still going to have to grow its tax revenues (Murphy tried that, and everyone still hates him), slash the value of the benefits in the defined benefit plan, and/or default on the pension obligations? And, if that's the case, why do all this hard work--making consultants, investment bankers,and lawyers lots of money--to sell the assets. Why not just let the pension plan default now--ala Vallejo--and get on with the day of reckoning?

I'm not suggesting that this is an easy course--and I understand that Pittsburgh, unlike say USAirways or Bethlehem Steel, cannot dump its unfunded pension obligations on the taxpayer--but shouldn't we be discussing it? I mean, if a state takeover happens, might there not be a Whiskey Rebellion II here that would force Harrisburg to take notice when local taxes triple or quadruple? These are tough questions, but it appears to all the pirogie in the world to me that we are just rearranging the deck chairs on the USS Monongahela.

What is the plan to fund the other 50% of the unfunded liability???

Friday, March 19, 2010 2:44:00 PM  
Blogger C. Briem said...

MH.. I think you may more be thinking of some changes to the pensions for state workers.. There has been some tweaking, but not that much increasing the benefits for city workers during that period. There were lots of state mandates in the earlier past that pushed up the city's pension liabilities.. If anything, the Act 47 results pushed down the OPEB liability, but that is something we don't talk about a fraction as much as the direct pension costs.

Friday, March 19, 2010 6:17:00 PM  

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