Mayor Luke Ravenstahl and several allies have voted to change from 8 percent to 7.5 percent the expected investment growth rate that determines the city’s contribution to the Comprehensive Municipal Pension Trust Fund (“Outgoing, Incoming Mayors Differ on Pension,” Dec. 13). Although I generally support this change, it is disappointing to hear that this one decision is being made purely for political reasons as a last-minute budget alteration, when Pittsburgh’s pension plan is so much in need of fundamental reform.
I have recently participated in a team analysis of the fund as part of an online course from Stanford Business School called “The Finance of Retirement and Pensions.” We concluded that the 8 percent expected rate was indeed unrealistically high. It is one of several optimistic measurements which led to an overstatement of the fund’s health.
However, the rate lowering is a Band-Aid. The pension plan is in need of surgery: comprehensive revision, new funding sources, structural changes. The mayor’s office, city council and the unions all have much to gain from a healthy pension fund. Unless we can figure this out, the city is likely to have to cut essential services in order to pay pensions. It is happening in other places and can happen here.
Residents deserve a vital and functioning city, and city workers deserve a pension. It will take more than politics to work toward both these goals.