City Boosts Pension Payment to Gain ICA Budget Approval
A state-appointed financial oversight board required that Pittsburgh increase its yearly pension fund contribution, before giving approval to the mayor's 2012 budget proposal on Wednesday.
The Intergovernmental Cooperation Authority contends that the city's proposed pension payment of about $50 million wasn't enough to keep the fund on an even keel next year.
The ICA says that the city's pension line item should be at least $60 million in 2012. City Finance Director Scott Kunka obliged by infusing a one-time $10 million windfall in state pension aid into next year's pension payment.
The $60 million in pension funding now slated for 2012 is still short of the pension payout estimated for next year, which should total about $75 million. However, the fund usually grows via market investments.
In addition, the ICA diverted $1.4 million in second-quarter gaming revenue into the pension fund, on top of the city's $60 million payment proposal.
The amended city budget proposal for 2012, totaling more than $450 million, will be presented to City Council in mid-November.
Are Yearly Payments Enough?
ICA Chairwoman Barbara McNees said the increased payment is good, but at 62% funded, the pension fund is still dangerously short of its obligations.
"Poor market timing judgments, attempts to increase benefits, and/or delays in depositing sufficient employer contributions could put the fund at risk," said McNees.
Kunka agreed that while these yearly payments are necessary, a long-term solution is needed.
"It's clear, at this point in time, that just throwing money at the problem is not the solution, that reform is needed, that the current benefit structure is unsustainable," said Kunka.
Efforts to Reform
Kunka said that both Pittsburgh Mayor Luke Ravenstahl and City Controller Michael Lamb are in favor of lobbying the state government to reform pension policies.
"We should be able to offer a defined contribution program," said Kunka. "And we're not talking about doing something for current employees, but as we move into the future, we ought to be able to offer employees a convertible kind of a pension plan."
Kunka said other reforms include a ban on late-career wage spiking to increase benefit payouts, and an overhaul of the state's pension aid system.
During Wednesday's meeting, the ICA also mandated that the city invest $2.2 million into the creation of an "Other Post-Employment Benefits Trust Fund" (OPEB) to help fund retiree health care costs.
The ICA's third condition for budget approval was the development of a five-year capital funding strategy for the city.