City and State Officials Call for “Common Sense” Pension Reform

Mar 4, 2015

Despite putting revenue from parking and the Rivers Casino into the pension fund, Pittsburgh’s pension problems aren’t getting any better.

That’s according to a recent audit that showed as of January 2013, Pittsburgh’s pension fund had assets of $675 million, but the liabilities stood at $1.16 billion – meaning the city only has about 58 percent of what it needs in the pension fund in order to ensure current and future payments compared to 62 percent in 2011.

In 2010, before Pittsburgh’s proposal to bolster the fund's assets was approved by the Municipal Retirement System, the city’s funding ratio was 27 percent.

State Auditor General Eugene DePasquale said Pittsburgh has done just about everything it was asked to do after the last audit, which covered a period of time between 2010 and 2011, but the city is still having trouble.

“They lowered their anticipated rate of return, and they are again putting more money in than the Mandatory Municipal Obligation would require them to do,” DePasquale said. “And even with that, they are still falling behind.”

According to DePasquale, part of the reason Pittsburgh’s ratio dropped was because the city lowered its assumed rate for returns on investment from eight percent to 7.5 percent.

He said the audit also showed that there were some benefit calculations that had not been corrected, but Mayor Bill Peduto is working on ordinances to make sure the calculations are more in line with what the state auditor general’s office feels is appropriate.

Paul Leger, Pittsburgh’s finance director and executive director of the pension fund, called the pension system a “financial black hole” and said the city put 11.3 percent of its budget into the pension last year but 12.9 percent in it this year. 

“Every year, I expect this to go up as a percent of the city operating budget,” Leger said. “And unless we make some changes – and there are many changes that can be made – we cannot possibly continue to do this.”

Peduto said his administration did everything they could in the first year in office to help with the pension system without asking for outside help.

“Over this next year, what we need to do are two major things,” Peduto said. “Number one is we need to have a strong partnership with our non-profits, mainly the large institutions, to be able to pay their fair share into a new program, and number two, we need to get common sense pension reform completed in Harrisburg.”

He said Democratic and Republican mayors and councilmembers throughout the state are calling on the governor and state legislature to make what he calls “common sense reforms.”

These reforms include new hires shifting to a cash balance hybrid plan, requiring pensions be calculated on base pay with only a small percent of overtime, removing the pension benefits from the collective bargaining process and creating a new state law on how the reimbursement formula is given to municipalities.

“Without change, without common sense reform from Harrisburg, the state municipal pension plan is doomed to fail,” Peduto said. “And we are not given the authority, nor the power, nor the options by the state legislature to be able to control what that journey is.”