So where do we go from here? The plan to lease our assets for 50 years did not resolve our pension crisis. Like a bucket with a hole in the bottom, the only thing it would have done was to buy us more time. But, with a system that bleeds over $30 million a year, it would only be about a dozen years before we would have spent all the money JP Morgan was offering. We would have been back to where we are now and would have the highest meter rates in the country. Fortunately, we have an opportunity to solve our pension crisis through Act 44 and City Council and City Controller Michael Lamb have worked on an interesting plan that, if done correctly, could address the long term problem.
There are three options that Council is now debating: (1) Utilizing Act 44 and allowing the Pennsylvania Municipal Retirement System (PMRS) to administer our pension funds, (2) Supporting the Controller-Council Plan to turn over meters and a garage to the Parking Authority for $220 million and (3) a hybrid plan that would do both — allow the city to receive the $220 million from the Parking Authority and then allow PMRS to administer our pension plan. I believe that it is imperative that whatever plan is finally approved, we need to have PMRS administer our plan.
In addition to the obvious reasons explained above, a state administered plan would use conservative estimates and assumptions. Their investment portfolio is not as risky, but has performed at over 8 percent over the past twenty years. They would require us to develop a 30 year plan to get to 100 percent funded and would also require us to have a new plan for our new hires. These critical factors would not be part of our calculations, if we continue to administer our own plan. The Board of PMRS is non-partisan — decisions regarding the financing of plans and benefits are not determined by “election year decision making.” Additionally, it would cost the city less money for PMRS to administer our plan than what we are paying today. Politics would be taken out of the investment process. No more “pay to play” deals between banks, consultants, brokers and law firms. All bids have to be competitively bid under a state plan and lobbyists are prohibited. Also, any firm that bids on the work is prohibited from making political contributions. Only under state administration, will we get this level of good government.
Another critical point: A state administered plan guarantees against investment loss. Through conservative assumptions and the pooling of over 900 other plans, PMRS has been able to guarantee to its clients that their pension funds will not be subject to the roller coaster rides of the market, thereby protecting their investments and guaranteeing their rate of investment will be met.
Finally, unlike our present system, administration of pension plans by PMRS has a proven track record of success. Today, over 900 pension systems are administered by PMRS.They require all their clients to get to 100 percent funded. In 1985, Harrisburg Firefighters Pension Fund had five months left before it went bankrupt — five months until all the money was gone. PMRS took over administration of the pension plan. Today, it is 100 percent funded. The story is the same for the other municipalities that have agreed to work with them. They require us to live within our means — something we have not been able to do on our own.
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