Senate OKs pension bill affecting city
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HARRISBURG -- The state Senate wants a state pension agency to take over Pittsburgh's troubled and underfunded municipal pension system.
The 38-9 vote on a pension reform bill yesterday came despite a last-ditch plea by Mayor Luke Ravenstahl for legislators to delay action on the bill, which he said could cripple the city's finances.
Mr. Ravenstahl unsuccessfully asked senators to give the city two years to fix its own problems, rather than have the Pennsylvania Municipal Retirement Board seize its retirement fund and require budget-busting payments.
The mayor said he was "disappointed the bill passed the way it did" but not surprised, given the conversations he had with legislators in recent days.
"Our goal now is to work with the House delegation to attempt to get additional amended language in the bill so Pittsburgh taxpayers are protected," he said last night.
"Just give us a chance to solve this locally," the mayor said in an interview yesterday between calls to Harrisburg. "We can do it. ... Give us a two-year window to explore leasing [public] garages" and putting the proceeds into the city's pension pool.
But most Pittsburgh-area senators, of both parties, supported the state takeover, including Democrats Jim Ferlo of Highland Park, Jay Costa of Forest Hills, Sean Logan of Monroeville and Wayne Fontana of Brookline, plus Republicans Jane Orie of McCandless and John Pippy of Moon.
The Senate's action isn't the final step, however. The changes made to the bill -- which also will permit Philadelphia to increase its sales tax to 8 percent -- still must be ratified by the Democratic-controlled state House. Since labor unions in both Philadelphia and Pittsburgh have concerns about the bill, House passage isn't automatic. Gov. Ed Rendell indicated he would sign the bill, which is strongly supported by Philadelphia Mayor Michael Nutter, if both chambers approve it.
Mr. Ferlo and Mr. Costa insisted that, contrary to Mr. Ravenstahl's fears, the bill will benefit Pittsburgh's ailing pension system. Because of a sharp decline in investments over the past year, the system is only 28 percent funded.
Mr. Costa said he is concerned about a system that is 72 percent underfunded. He said the bill would give Pittsburgh "a 30-year fresh start" on fixing its pension system.
"Minimum municipal [pension] obligations" will be lower for the first eight years -- until 2017, when, Mr. Costa said, the city's debt level will significantly decline and allow it to add more to the pension system.
The bill also freezes Pittsburgh's parking tax at 37.5 percent, and allows the city to devote 6.7 percent of that levy for pension costs. If Pittsburgh does sell its public garages, the city parking tax can rise to 40 percent, with all of the additional 2.5 percent in tax going for pension costs.
The bill also has "anti-spiking" provisions, Mr. Costa said, so that employees' overtime payments won't figure into their final pension amounts. "This bill is better and more tolerable for Pittsburgh" regarding pensions, Mr. Costa said.
Mr. Ravenstahl is planning a public meeting on the pension bill today at 6 p.m. in City Council Chamber to explain its ramifications to the public.
The pension legislation, House Bill 1828, originally started as a way to allow Philadelphia to raise its sales tax to 8 percent to shore up its pension fund. Then Republicans, who control the Senate, broadened the bill to apply to many cities with troubled pension funds, including Pittsburgh.
It creates four categories of municipal pensions -- those that are well funded, those that have some problems, those with greater problems and greatly troubled funds that have less than half the money they need. The last category includes Pittsburgh, which is only 28 percent funded. Municipal pensions in the last category will be taken over by the state.
"This bill will help municipalities live up to their obligation to maintain healthy pension funds," Mr. Ferlo said.
But Mr. Ravenstahl complained that the fast-moving Senate process didn't give him a chance to analyze the ever-changing legislation's impact.
"We got [the bill] on Sunday," he said. "It was read Monday. It [was] voted on [yesterday]. ... How are we supposed to react to something that wasn't on the table until Sunday?"
He said constant amendments made it hard to calculate the legislation's effects on the city, but he held to earlier estimates that it would force Pittsburgh to put $70 million a year into a state-run pension pool -- up from the $45 million it is putting into its own fund this year.
The city was already struggling to figure out how to increase its annual pension investment to $60 million, he said, and going higher would force as-yet-undetermined tax hikes or service cuts. Senators said they don't think the bill would have such a dire financial effect.
Mr. Ravenstahl said the bill would give the city the option of ramping up to higher pension payments, but that would just postpone and worsen a crushing problem.
"Eight years from now, disaster," he predicted. "Total disaster. ... Year eight, the city would crumble" under the weight of $100 million-plus in payments into the pension pool. Mr. Costa disagreed.
The legislation would not affect the pensions due to existing employees but would tilt benefits due to workers hired next year and beyond. A typical police officer who retires now might get a $2,500-a-month pension, he said. Under the benefit calculations mandated by the legislation, the typical officer of the future would get around $3,375.
Meanwhile, the typical refuse worker of tomorrow would get a pension payment that was around half of that collected by refuse workers retiring today. "It's not fair. It's not equitable," Mr. Ravenstahl said.
He said two years would be enough time for the city to complete the process of deciding whether to lease its parking garages and possible on-street meters to a private operator, and putting the proceeds into the pension pot. At last count, it contained $251 million, short of the $899 million it should contain to meet its long-term obligations.
First Published August 27, 2009 12:00 am