So here is one of those factoids that may confuse those who read
too much news.
So what do we know about the City of Pittsburgh's pension
system? Officially it was funded at around 56%, but that really is an old
number. It also is a number that is more than double what it would be if you
took out the notional 'asset' that I still find hard to talk about seriously. No matter. Pretend it really is 60% for sake of argument. Only in Pittsburgh logic is that a 'success' when the rest of the world would call it abysmal.
Now all propblems at the Port Authority are being laid at the
feet of escalating pension costs. Sure
must be that the Port Authority's pension system is in far worse shape than the
city of PSERS right? Just must be.
And like all common wisdom, it is far more common than
wise. Here is the time series (page 25) up to the
latest public info on the funding ratio for the Port Authority drivers pension
system. Is this what you expected given what is in the headlines?
Seriously.. what number would you have guessed? It turns out a lot of pension math is misconstrued in public.
Note the latest data there is for January 1, 2010 which is
still on the heels of some bad stock market losses for most funds. 2010 and then 2011 were both real good years for public pension systems in the US, so maybe they are even higher than the 87%. Think about that. The current funding ratio might be a slightly relevant number for the current public debate?
The absolute numbers of relevance are that
the calculated liability is $781 million and the assets available are $681
million. Compare to the City of
Pittsburgh which is now over a $billion in calculated liability and an ever
diminishing amount of liquid assets to cover it. I have never seen any reporting on how well
funded the drivers pension plan is. In
fact, I have seen no reporting of the hard data on the pension plans $$ assets
In fact.. I wonder a
bit. That January 1, 2010 calculation
for the liability value is a dynamic number as actuarial valuations too often
are. The assumptions include some very
steady wage increases for the Port Authority drivers.. all of them. What do we know? A lot of drivers are about to be laid off as
routes are cut. Lots of that liability
is about to be lopped off, maybe a lot of that liability has already been taken off the books given layoffs since that January
1, 2010 reference data now 2.5 years ago. I bet wage increases will come
in a bit lower than the actuary assumes which would also lop off a big part
of the liability calculation. A small change in that assumption will bring down the calculated liability a lot actually. Could it
be that if there was a current actuarial valuation that the current asset
values would make it fully funded? If
not, it certainly may be the best funded large public pension system in
Pennsylvania. You would never get that
from the headlines though.
Now.. the retort is that the the issue is health care costs, and in particular pension health care costs. True. But note that once you start talking about
health care costs you are talking about something different from the pension
discussion normally in the public debate for say the City of Pittsburgh. Lots of public institutions have a big
health care liability that is completely unfunded and is basically a big train wreck going to happen. It is a nearly ubiquitous problem in both public and private sector. It just becomes an apples
and oranges discussion when you talk about the pension problem at the Port
Authority if there is any comparison to the pension debate for the city which
mostly ignores the problem.
In fact there is a really convoluted aspect to this. The Port Authority has some big pension cost
problems when it comes to health care expenses now and in the future. The big reason is that the
health care liability has no $$ put toward it. That is a very different problem than what I think most people assume that the pension fund itself is underfunded.
Like most public institutions you can't say it was a big secret this health care bill was
Also was no secret that most public institutions were not putting money away for the expenses they knew were coming due. In fact I think the rule that nominally is forcing public
institutions to address this big looming problem, something called GASB 45, was mentioned right here years ago.. 2006 actually if you poke at that link so yes I know what the issues are. That the Port Authority is
ramping up payments to fund some of the that health care liability is actually
commendable for the record. But if you
are are lead to believe that the Port Authority is in worse shape than the city which also clearly has several hundred $million in unfunded health care liability but is just
choosing to continue without such contributions is a meaningless
comparison. Also a little issue with
Allegheny County as well which has seen its pension funding ratio falling behind over
the last 5-10 years. Few mention that
much, or talk of shutting down a third of the county. Maybe we can lop off everything north of the Allegheny River?