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House to delay vote on state pension takeover

| Saturday, Sept. 5, 2009

House Democrats agreed Friday to delay a vote on a state pension takeover to allow for changes sought by Pittsburgh leaders and statewide police and fire unions.

"We have heard the concerns from Pittsburgh, police officers, firefighters and other public employees and want to address those concerns to the best of our ability," said Brett Marcy, an aide to House Majority Leader Todd Eachus and spokesman for House Democrats. "We believe that it's of critical importance, so we want it done right."

The announcement occurred hours after the head of the Pennsylvania Municipal Retirement System — which would take over underfunded municipal pension systems under the proposed legislation — said that Mayor Luke Ravenstahl's plan to fix Pittsburgh's pension should work.

Lawmakers said they wanted to hear that before considering Ravenstahl's request to delay the planned vote Tuesday and to exempt Pittsburgh for two years from the takeover — which affects pension systems with funding levels below 50 percent.

"If we don't get over 50 percent, we'll be taken over by the state, but as long as we get the votes we need, we'll be able to solve this problem locally," Ravenstahl said.

Philadelphia leaders pushed for an immediate vote on the bill, which allows that city to add an extra 1 percent sales tax to raise $700 million for its pension funds and budget deficit. House Democrats, though, postponed voting on the bill until Thursday, which the Senate amended to include the pension takeover.

"We sent over what we thought was a moderate piece of legislation, and what we got back was a far cry from that. It has morphed into something much larger than what we wanted," said Johnna A. Pro, a spokeswoman for Democratic state Rep. Dwight Evans, chairman of the House Appropriations Committee.

Firefighters and police planned to rally against the bill Tuesday in Harrisburg. Union leaders decried provisions that they say would dramatically increase city payments into pension systems at the expense of workers.

"The Senate amended it to include language that affects Pittsburgh and thousands of other municipalities across the state," Marcy said. "Hopefully an amendment will be agreed upon, it'll go back to the Senate, they'll concur on the bill and it'll go to Gov. (Ed) Rendell for a quick signing."

Nathan Silcox, an aide for Senate Majority Whip Jane Orie, said the McCandless Republican supports the delay and would work on changes that could pass the House and Senate.

"It will be in the mayor's hands to make this actually happen in two years now," Silcox said.

Pittsburgh was among cities targeted by the state takeover because is has only about 28 percent of the money needed to cover liabilities of 6,000 active and retired members.

Ravenstahl lobbied lawmakers for the exemption with a plan that he said would bring the funding level in the city system to about the 50-percent level in two years by getting $200 million from the sale or lease of city parking garages.

Jim Allen, secretary of the state pension system, announced an analysis of city-pension data showed Ravenstahl's plan "to be in large measure valid, based upon the underlying assumptions used to construct the funding model."

"It basically supports the information that was distributed to members of the delegation" Thursday, said Rep. Dan Frankel, D-Squirrel Hill.

Not everyone is sold on the projections, however.

The mayor's plan assumes the pension fund would net $200 million from the garages and earn high interest; that payroll growth would be slow over the next 30 years; and that the city's expenses would decrease by $500,000 next year.

"They include very aggressive assumptions," said Richard Dreyfuss, a pension expert at the Commonwealth Foundation. "I just don't see where those returns are going to come from."

The mayor's plan calls for 8 percent investment returns. Most private-sector plans use 6 percent or 6.5 percent, Dreyfuss said.

City Finance Director Scott Kunka said an 8 percent return is a conservative number.

"If you look at the performance of the portfolio over the years, most of the years (the city) has been exceeding that level," Kunka said, noting that the city's portfolio lost money last year because of the stock-market crash.

Staff writer Jeremy Boren contributed to this report.

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