(November 5, 2010) — Pittsburgh Mayor Luke Ravenstahl is continuing to express concerns about the impacts of a pension fund state takeover, saying a report by an agency set to take over Pittsburgh’s underfunded pension system is even “worse” than he anticipated.
“I’ve understood the devastating effects that our residents and employees would face under a state takeover scenario, and I’ve done everything in my power to prevent it and protect this City from another financial collapse,” Ravenstahl said in a press release. “Hopefully today, the financial reality of these impossible payments becomes crystal clear for members of City Council.”
The mayor’s worries surround the decision by the Pennsylvania Municipal Retirement System (PMRS), which presented the city with a 30-year mandated pension payment plan that triples the city’s mandated annual pension payment in seven years.
City council members were told yesterday that if the city fails to meet a state funding minimum by the end of the year, Pittsburgh would have to pay $2.6 billion to $3.6 billion over the next 30 years to get the pension 100% funded, according to a report by the Pennsylvania Municipal Retirement System. The higher obligations would start with an $86.3 million payment in 2013, peaking at a $160 million payment in 2032 while declining to $121.6 million in 2039. “I said all along that the numbers would not be pretty, but they are even worse than I expected,” Ravenstahl said in a statement.
“The time bomb is ticking, and it’s about to explode,” Councilman Ricky Burgess told the Pittsburgh Tribune-Review. “This council, this mayor, this administration will be recording history by our actions over the next few weeks,” he said, warning that if the city makes drastically higher payments into the pension funds, it may lead to insolvency.
Currently, the city’s retirement system has only 28% of the assets it needs to cover its obligations. If the city is unable to raise that percentage to 50% by year-end — which will require about $220 million, equivalent to about half of the city’s annual budget — Pennsylvania law will force the state to assume control over the retirement system.
While state takeover of a local pension is relatively rare, many industry analysts anticipate more takeovers ahead as cities struggle to fund their schemes in the face of declining revenues and heightened liabilities.
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