Pension crisis extends far beyond Pittsburgh
Pittsburgh, Philadelphia and Scranton.
On “Jeopardy,” the question would be: “What are three Pennsylvania cities with severe pension problems?”
Officials called Pittsburgh the poster child for troubled public pension systems, with about 27 percent of money needed to meet nearly $1 billion in obligations for 8,000 active and retired employees. But the city is not alone. According to a Pennsylvania Employee Retirement Commission report, 27 Pennsylvania municipalities have public pensions containing less than 50 cents for every dollar owed.
Gov.-elect Tom Corbett said burgeoning financial woes in state and school pensions will be among the first issues he addresses next year. Rep. Mike Turzai, R-Bradford Woods, a contender for House majority leader, said lawmakers likely will revisit municipal pension issues.
“I don’t have the specific solution at hand, but I think the whole public pension system has to be a topic for discussion to ensure that existing obligations are funded and going forward (the public sector) looks a lot more like the private sector,” Turzai said.
Pittsburgh Councilman Ricky Burgess believes the state will force the city to sell its parking or water systems to bolster the pension. City leaders learned last week that without a quick infusion of cash into the system, required annual payments into the funds would more than double to more than $100 million.
Battles over competing plans to raise the money fast — Mayor Luke Ravenstahl wanted to lease the parking system, and council tried to sell part of it to the Pittsburgh Parking Authority in exchange for a loan — leave the city with no up-front cash payment.
Time is running out. Pittsburgh faces a legislative mandate to boost pension funding to 50 percent by Dec. 31 or hand control of it to the Pennsylvania Municipal Retirement System, which would require higher contributions based on its assessments.
Philadelphia, which has 45 cents for each pension dollar owed, narrowly escaped such a mandate when lawmakers negotiated a deal that permitted the city to raise its sales tax 1 percentage point for pension contributions.
Although a takeover of the Pittsburgh funds would be a first, many struggling municipalities and cities face the prospect of relying on taxpayers for extra cash, cutting municipal services or doing both to keep up with promises to public employees and retirees.
Turzai suggests a combination of a defined contribution or 401(k)-type system for new hires and cash from the proposed sale of the state liquor store system to fund public pensions.
“I think (Ravenstahl) was on the right track looking for an infusion of outside cash, but that has to go hand-in-hand with substantive changes going forward,” Turzai said.
After taking office in 2006, Ravenstahl gathered municipal leaders from across the state to push for pension changes, including allowing employees to enter defined contribution plans, merging city pension plans, eliminating overtime from pension payment calculations and increasing state contributions to them.
“Our voice isn’t large enough in Pittsburgh,” mayoral spokeswoman Joanna Doven said. “We needed municipal managers across the state on board with this plan.”
Despite intense lobbying, Doven said, “Nothing ever happened.”
Sen.-elect Jim Brewster, who juggled pension and budget obligations as McKeesport mayor for six years, said change is critical.
“Let’s declare this an emergency, and let’s get the right people at the table. The time is right to talk about all of them and do it now before emotions get to the level they are in Pittsburgh,” the McKeesport Democrat said. “We need to look for fairness and balance, not winners or losers.”
Although the pension system in Allentown is 68 percent funded, officials in the state’s third-largest city are feeling the crunch. Mayor Ed Pawlowski said the city’s 2011 budget calls for a 40 percent increase in the income tax to underwrite pension contributions that increased from $5 million in 2006 to $15.7 million in the coming year.
“These pension liabilities are crippling every municipality across the state. I’m hoping our new Legislature and governor take this on in a comprehensive fashion,” he said, calling this the “single issue” that could force more towns into state receivership.
Scranton Mayor Chris Doherty’s city has 47 cents for every dollar it owes the pension. He said when cities such as Scranton and Pittsburgh reduced their work forces, they lost state pension money because the state bases pension reimbursements on the number of employees.
“I think this is one area where the state could help us out. We downsized tremendously, but we pay so much for legacy costs — pensions and retiree health care — that it eats everything up,” Doherty said.
Likewise, state law prohibits municipalities from adopting defined contribution retirement plans for new hires.
“Give us the freedom to do it. Give us the power to do it,” Doherty said.