Struggle to fund pensions in region's municipalities divisive
After years of struggling to play catch-up to fund pensions for its workers, West Mifflin officials took a different route in November.
The borough borrowed money through a pension bond so its pensions for police and non-uniformed employees are 100 percent funded, Manager Brian Kamauf said. Doing so made the borough's annual payments into the system more manageable.
“Our payment last year for pension payments was $1.4 million. Now with the bond, this year, I think our bond payment is $760,000,” Kamauf said. “It made sense for us.”
The borough no longer is among 573 municipalities in Pennsylvania with pension plans that the state auditor general says were underfunded by at least $6.7 billion as of Jan. 1, 2011, based on the most recent data from the Public Employee Retirement Commission.
State Auditor GeneralEugene DePasquale released a report last week about the status of municipal pension plans and recommended changes to them.
DePasquale appeared at a news conference on Wednesday with Mayor Bill Peduto, who has been working with a bipartisan group of mayors to devise ways to find the money to cover their towns' pension obligations.
“Some pension plans are so underfunded that promised retirement commitments are at risk. If they fail, the cost will be passed onto the taxpayers. This liability can truly become every taxpayer's nightmare,” DePasquale said in the report.
Pennsylvania's pension picture has improved somewhat because tax revenues have rebounded slightly since the recession ended in 2009, said James L. McAneny, executive director of the Public Employee Retirement Commission.
Still, he is not a fan of municipalities taking out bonds to fund pensions, as West Mifflin did. “That doesn't mean it doesn't work,” McAneny said, but it could lead to employees trying to negotiate better pensions because the pension debt is fully funded.
At the top of the list of 25 municipalities with the largest, unfunded pension liabilities were Philadelphia, with $4.8 billion, followed by Pittsburgh, with $380 million. The two cities accounted for three-fourths of the $6.7 billion total.
Still, with Pittsburgh funding pension plans for its fire, police and municipal employees at 62 percent in 2011 and 64 percent as of Dec. 31, the city's pension picture has improved, Controller Michael Lamb said.
“We're not out of the woods by any stretch, but compared to 2010 when we were 28 percent unfunded,” the city is in a better position, Lamb said.
Some steps the city took to right its ship included a 2010 deal that directed parking tax revenue into the pension plans. Of $60.2 million in payments into the plans last year, $13.4 million came from parking taxes and $10.6 million came from employee contributions.
The rest came from city funds.
The city also has fewer employees — 3,100, down from 5,000 in 2003, when the state declared Pittsburgh financially distressed under Act 47.
Still, the city pays between $82 million and $85 million in pension benefits to retirees and survivors annually, Lamb said.
One issue state legislators need to look at is the retirement age, he said.
Firefighters and police officers can retire at 50 after 20 years of service, Lamb said.
“Is 50 really too young to have a retirement?” he said.
During contract negotiations, officials need to look at getting more contributions from employee unions, he said.
That's the wrong direction to take, said one union leader.
“We pay our fair share,” said Joe King, president of the Pittsburgh Firefighters Local No. 1.
Since 2010, the firefighters have contributed more of their wages to their pension fund — 7 percent — than the 6.5 percent required by law.
“We don't have a pension problem in this city. We have a revenue problem,” King said.
Pittsburgh needs to focus on getting large nonprofits, such as Highmark Inc. and UPMC, to contribute more revenue, such as with payroll preparation taxes, King said.
Aliquippa, whose police, fire and municipal employee pensions have been funded at 62 percent for the past several years, is categorized as financially distressed by the state.
The city is contending with powerful unions and less revenue, city Administrator Samuel Gill said.
“So we've consistently got this on the front burner, looking at our employees, the years of our employees, trying to come up with better solutions with the … collective bargaining units to address this issue,” he said.
Tory N. Parrish is a staff writer for Trib Total Media. She can be reached at 412-380-5662 or email@example.com.