State budget: Pittsburgh City Council looking for pension help
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HARRISBURG -- Pittsburgh Council members arriving here yesterday in search of help with the city's struggling pension plan got little reason for optimism, as the state began trying to grapple with its own, similar problem.
They arrived just after Gov. Ed Rendell, in his budget address, announced that the state's once-sound system faces its own yawning pension gap that could blow a billion-dollar hole in its budget five years from now.
And interviews with administration officials and legislators suggest that there's little appetite for what council members want most -- an opportunity to roll the city's pension fund into the state's.
"The rest of the state is not going to agree to correct overpromises made by rightfully elected members of the city of Pittsburgh," said state Budget Secretary Michael Masch. "We cannot simply erase bad decisions that former leaders of Pittsburgh made. But we can better manage the city going forward so there's a brighter future than the recent past."
The city's pension fund contains less than half of the approximately $800 million it should in order to cover future obligations, and it continues to bleed because payments outstrip contributions and investment earnings. In the third quarter of 2006, the fund's balance dipped by $3 million.
That is translating into ever-growing payments of taxpayer money into the system.
Tops on council's agenda for their two-day trip to Harrisburg was trying to get state officials to consider a system like Florida's, where municipalities can opt to fold their pensions into a statewide system.
But Mr. Rendell said the state program, too, is heading for trouble. In 2012, if the current payment schedules aren't changed before then, the state's required payment into its pension funds is set to jump by $1.6 billion.
The state's two big pension funds, one for its own employees and retirees and another for school teachers and employees, are a combined $12 billion short of where they should be to cover all of their future obligations.
The governor said he'll seek "a long-term solution to our pension problem that can be acted on this fall."
Mr. Masch would not elaborate, other than to say that the governor "wants to have the Legislature put a blue-ribbon group together" involving Democrats and Republicans from the House and Senate.
He said the administration already is working on new funding plans that could correct the lack of money before what amounts to a huge balloon payment becomes due in 2012.
Merging municipal systems into the state's fund, though, isn't among the options on the table. "We have every [municipality] at different funding levels with different rules," he said. "There's no magic bullet on these things."
State Rep. John Maher, an Upper St. Clair Republican who used to audit municipal pension funds, said that Mr. Rendell has been "an ostrich with his head in the sand since his first day as governor" in regards to the state's looming pension problem.
He said it was irresponsible for the governor to defer solving the problem until a blue-ribbon panel can review it. "The state should be dealing with this problem right now," he said.
He suggested that the state could shift future employees into a system in which contributions are defined but benefits are determined by the success of investments, like a 401(k) plan.
He said rolling the city's pension into the state's would mean "the city's fiscal irresponsibility becomes an obligation of their neighbors in the suburbs" and wouldn't be politically palatable.
Council members, after closed-door sessions with legislators and lobbyist Charles Kolling, said they felt that the city's problems got a fair hearing, though no promises were made.
"I think that there is an understanding that pension, healthcare, debt and other legacy costs are something that all older communities are facing," said Councilman William Peduto. The legislators they met with understood that there should be a comprehensive, statewide solution to the problem.
"There's an agreement to work together toward finding solutions," he said.
First Published February 7, 2007 12:00 am