Archive for February, 2011
Tuesday, February 15th, 2011
Posted by Bill Peduto
In 2010, the State mandated that the City of Pittsburgh meet a nearly impossible goal. A distressed city with two oversight committees was asked to come up with nearly $250 million in new, unknown revenue — and we had to do it by the end of the year. The proposal offered by the Mayor to lease all the parking assets for fifty years to private Wall Street interests was studied at length. Independent analysis showed that nearly $2.5 billion in lost revenue would be realized under that plan. To be certain, the rate of return for the private financial interests was greater than the costs associated with borrowing the funds (and using the same rate increases to pay for it). However, the Administration was opposed to any plan that would involve the issuance of debt. Finally, in the last two weeks, a compromise was offered by the State to permit the funds to be paid over time. Council approved that plan, with the support of both oversight committees, at the end of the year.
So where do we go from here? It is well known, and well documented, that we still need pension reform. Reform is needed from Harrisburg as well as Grant Street. We also need the cooperation of the Parking Authority in order to complete the plan approved at the end of the year. But, what is also needed is a comprehensive six-year capital budget that takes into account debt payments, capital budgets and pension costs. As this PowerPoint presentation shows, we have the opportunity to restructure our budget by 2018, when debt payments are reduced and have a new, sustainable budget by 2019. How we get there is contingent on a strict, disciplined approach from 2012-2017. What is needed is a six-year debt-capital-pension plan and we need to begin it — NOW.
Wednesday, February 9th, 2011
“By relying on outdated actuarial tables, making only minimum payments, and failing to limit benefits as the number of active workers paying into the plans fell, Pittsburgh has accumulated a $700 million unfunded liability, and its 29.5% funding level is among the lowest in the U.S.
Officials narrowly met an end-of-year deadline set by the state to present a plan for reaching a 50% funding level, which they hope will avert a possible state takeover of its three pension plans for city workers.”
While the article provides some cover to the city noting that things like state-mandated laws, the growth of non-profits and the 2008 stock market crash were beyond the city’s control, they do pick up on some key errors. These include decades of ignoring our unfunded liability and the continued use of 1984 life-expectancy tables all the way into the last decade.
The article does note some recent changes which will help including reducing the assumed rate of return to 8% and cutting the period in which liabilities must be paid to 30 years — or in other words, taking a more conservative, responsible approach. However, the article identifies the need for a change in the benefits themselves in order to provide a real fix for the system — something which necessitates state intervention.
You can read the entire article here.