Friday, December 5, 2008

That Pensions Thing: The End is Near.

The problem can be ignored for only a few more years. The next mayor will likely be unable to escape a full-blown pension fund crisis. Eventually it will become a current cash flow crisis as the pension funds' assets are drawn down completely. At that point it will become apparent that the city will not be able to solve the pension crisis on its own. (P-G, Chris Briem, Mar 27 2005)

A few more years from spring 2005 ... uh ohs.

The fiscal year 2006 city budget, as projected by the outgoing administration, has a mere $1.2 million surplus, roughly 0.29 percent of a total $415 million budget. That virtually non-existent cushion is actually an optimistic scenario for where the city will find itself at year's end. A fixed property assessment base, declining population that erodes income tax revenues, delayed or nonexistent casino revenues, rising fuel prices and escalating pension fund payments will each dwarf any surplus the city budget will have for years to come. (P-G, Briem, Oct. 30 2005)

Yes, but at least we retain some yearly surpluses. Disaster can be held at bay so long as we don't go through a second national recession this decade or anything.

The recession hasn't been kind to Pittsburgh's weakening pension fund.

The fund lost $124 million this year through November, leaving it with $261 million to cover $899 million in liabilities, according to a report Thursday from investment manager Mercer Investment Consulting Inc. (Trib, Jeremy Boren)


That means the city must put more of its operating budget into the pension. The city is due to put $44.5 million into the pension fund in 2009, $6 million more than this year.

Ravenstahl would not say whether the additional payments will result in cuts elsewhere in the budget. (ibid.)

Nothing like a good crisis to focus the humours, is there?

Not that we have much of a choice, but a million here and a million there and pretty soon we're talking serious cheddar. There will come a point when Our Pension Crisis will cease seeming so abstract and nerdly to average Pittsburghers. We call that Tough Choices time.


How did we get into this mess, you ask? We present the Pittsburgh Comet Total Ninny's Guide to Our Municipal Pensions Mess:

1. Decades ago, Pittsburghers accorded themselves the services and infrastructure of a large and splendid city, by means of borrowing from future generations.

2. Most of these Pittsburghers up and left, having lost their jobs or tired of paying for those services -- and took their future generations with them. ("Leaving" can mean moving as far away as Ross Township.)

3. Those left behind have stubbornly declined to crowd in closer together and sell off extraneous neighborhoods, or scale back on the level of city services very much.

4. And the state robbed us of our ability to tax land held by non-profits, who promptly started gobbling up more and more land.

5. And somewhere along the way we had our existing property tax assessments frozen, which has a disproportionately ill effect on declining urban areas.

6. And the occasional Awesome Accounting Gimmick.

7. And we've been spending our "spare" public cash and assets on privately held sports stadiums, "destination" retail and other totally necessary white elephants.

8. At length, due to all the expensive silliness described above, ever more Pittsburghers bid the City a fond adieu. Steelers Nation grows and becomes a global phenomenon, local traffic lightens up, housing costs become renowned for their shocking affordability and we all wonder dotingly upon our small-town friendliness.

9. So the bills from previous generations continue coming due -- and maybe we shouldn't have invested so heavily in the stock market -- and I'm not sure what happens next. But we're going to find out.


In case you didn't catch the news that the city's pension funds are down to $261 million, it's probably the biggest news you will read the least about... and the biggest finance issue that the city is facing that the 5 year plan put together by the Act 47 team pretty much ignores for reasons I really can't fathom. (Null Space)

Those last six years or whatever we've been in Financial Receivership AKA Distressed Status under the OVERLORDS? Killing time, basically.

In a letter to lawmakers, Ravenstahl said state help is "imperative."

He endorsed a five-point plan for statewide pension reform based on a plan by the Pennsylvania League of Cities and Municipalities. (ibid.)

We'll be very lucky to get two points passed. All five points boil down to some iteration of Why Don't You Just Give Us The Money.

Which is a reasonable request; it's just very much out of our control.

Pittsburgh Councilman Ricky Burgess said yesterday that he will propose canceling the 2.5 percent raises that the city's nine legislators, like all nonunion city employees, would get in 2009 under Mayor Luke Ravenstahl's proposed budget. (P-G, Team Effort)

By my math, this will save us a whopping $12,690, or .002% of our pensions shortfall.

Mr. Burgess said he also will introduce legislation compelling the city to put in place a new fiscal recovery plan by March 25. The current recovery plan under state Act 47 for distressed municipalities was crafted in 2004.

Wonder why that's appearing in the same article? Because it appeared in the same press release, silly.

Wonder why it appeared in the same press release?

Ms. McIlvaine Smith, who will start her second term [as state rep] in January, unveiled her anti-COLA bill last week. It's inappropriate for officeholders and others to take raises, she said, because the state faces a 2008-09 revenue shortfall that could reach $2 billion.

"Our constituents are losing their jobs and everyone is struggling to pay their bills," she said. "Thousands will not see their salaries or wages increased in the coming year, so why should we?"

The 2.8 percent salary increase for legislators will hike rank-and-file pay to $78,315, with top leaders as high as $122,000. (P-G, Tom Barnes)

If we'd like Harrisburg to take pity on us and provide us succor, it'd behoove us to follow along with Harrsiburg when it actually exhibits a moment of selflessness. We should expect this to be the first of many Harrisburg-cozying maneuvers out of Pittsburgh this winter.


  1. Hunh, I wonder why Chelsa dropped out.

    What about this guy? After all, I don't think this guy is available.

  2. Ed,

    neither of your links are working...

    Bram---seems like Doug Shields is against any talk of taking a pay raise away.

    I think the pay raise at the council level should go through.

  3. I have a lot of sympathy for Shields' and your position Matt, I really do. I hope it goes as a vote of conscience and no hard feelings and that's the end of it.

    But I don't think this is the year to take a pay raise. Blame Lehman Brothers ... and work a COLA already into the new 5-year plan. We should want to invest in our officeholders.

  4. Oops, sorry about the links, I got it into my head having the haitch tee tee pee colon slash shash was somehow tacky or something, I didn't think taking it out would disable the link. They were kinda throw away jokes anyway.

    You know, let's put the Mayor's and Council's pay raises in a referendum in an upcoming election, either the primary or the general. Personally I don't think either the Mayor or Coucil has done well enough to merit a raise, but I would be willing to yield to the will of the voters. Maybe we could get that set up for the State and even federal legislature too. Either that or we could tie their salary increases to increases in mass transit funding.

  5. Boo referendum. 5-Year Plan it and give it to them. However "good" they do or not, they work hard enough and have enough responsibility that they should be able to take care of a loved one who falls ill, for example. $57K is not poor, but it's not very far from poor these days.