Friday, August 24, 2012


Not "Orwellian" in the pejorative sense so much as the ... uh ... literal sense.

Pittsburgh pension board members refused Thursday to consider lowering the fund's annual investment-earnings projection, saying the move would require increased cash contributions each year that the city could fund only on the backs of employees or with a tax increase. (P-G, Joe Smydo)

Yes, but if we cannot achieve an 8% annual return (which is considerably difficult and would require luck even for aggressive private investors) then keeping future projections at 8% so we can feel better paying less now is like robbing Future Peter to pay Today Peter. One might expect Corey O'Connor to object, since it is to his administration that the brunt of this must inevitably fall.

A lower investment projection would increase the city's required annual cash payments to the fund, Mr. Ravenstahl said -- and leave him scrambling to find funds in a lean budget or asking taxpayers for more money. "To me, this is where this is going, and I'm not going to do it," Mr. Ravenstahl said, noting he has never advanced a property tax increase and doesn't plan to now.

Mr. Ravenstahl's office said a change from 8 percent to 7.5 percent could require the city to pay an additional $9.3 million annually to the fund, without making a significant difference in the funded liability. (ibid)

The implications being: right now all pension funding projections you see are $9.3 million per each year into the future (compounded with interest!) lower than we are making them look on paper.* And Ravenstahl would prefer one day to be remembered as the former Mayor who helped cause some present calamity, rather than make bold choices while in office to head off that reckoning. Simply another in a very long line which we know he abhors.

Ideally, instead of cutting an already lean budget to the marrow or raising residents' wage and property taxes, the emergency which lowering projections would cause reveal might instill the political dynamic necessary to do something else entirely. To follow-through on our bluffs to share in the economic successes of our so-called non-profits, to settle upon a least-odious new revenue stream from amongst a commuter tax, tuition tax, soda tax and others, or even to monetize cherished but underperforming assets.

The revelation would actually result in several "I told you so!" moments for our Mayor -- were he only willing to let the cat out of a bag which is visibly squirming and audibly meowing.

"I don't believe 8 percent is realistic for this kind of fund. But you're right, the other side is, can we afford to lower it?" Mr. Lamb said. Because of the opposition, he withdrew his proposal for a study. (ibid)

See, there's the difference. A Patrick Dowd would have gone full Cato: climbing walls, rending his garments, pointing at graphs. UPDATE: An anonymous commentator clarifies that his motion failed for lack of a second (so it must be true).

In addition, Mr. Huss said further discussion of pension funding only leads some retirees to fear that they won't get their checks. Pension payments, he stressed, are not in jeopardy. (ibid)

I hope this was taken out-of-context. They're the pension trust fund board. What are they supposed to get together to talk about? The spread on the Cookie Cruise?

Mr. Huss accused Mr. McAneny of telling overseers, who are often in conflict with the mayor, what they wanted to hear. (ibid)

That's a little more interesting. While it remains true that all this absurdity is 80% caused by political self-preservation, there remains a 20% influence from a four-way chess game to which you and I are not privy. Some of the players evidently feel an end-game is in sight, which I suppose theoretically could moot the absolute need in the meanwhile to come up with more money for pensions. By seemingly ignoring a mathematically untenable equation, it is the shape of that end-game some seem to be preparing for -- although the casual observer wonders whether we all benefit more by sticking with checkers.

MORE: Nullspace has some. If any anonymous commentators cut and paste the body of those subscription articles into my comments section, that would be a shame.

*- Aside from which, at least $287 million is contingent and non-interest-bearing. But we're doin' fine.


  1. I don't know how Lamb can let this go - doesn't his inaction directly contradict his job description in the worst way?

  2. InsolvenCity. Get out while you can.
    Don't even stick around long enough to ask Joe King how he can vote against adequate funding of pensions for the people he ostensibly represents, although that is one hell of a question.

  3. You're just one of those smug suburbanites with your SUVs and giant houses.

  4. Upper St. Clair, no doubt.

    It should be clarified that under oversight, lowering the rate isn't simply a matter of transparency and seeing what we need to pay -- it *triggers* increased mandatory minimum payments. While it's likely that burden would motivate calls for more revenue much as I wrote, it would also bring with it downward pressure on new benefit contracts. I assume Joe King isn't wanting to precipitate that.

    It would seem our Controller violated rule #1 - "There is no middle ground." We should be careful in this atmosphere to give credit where credit's due simply for broaching the subject. But to withdraw a motion just to study it...

  5. Lamb had no choice. He was unable to get a second.

  6. Ah! Then "withdrew" is a bit of a misnomer...

  7. Maybe it's some Roberts Rule of Order phrase.

  8. In the real world, a/k/a as the private sector, every one of these boobs would be shown the door. But, we're talking about Democrat politicians that has promised the moon and the stars while continuing the kick the can down the road.

    This not just a City problem. Practically every muncipality and State pension plan is way under water with no way to recover.

    Wait until the effect of the Teacher's Union pension payments start taking effect (next year, I believe). You ain't seen nothing yet.. your School District real estate taxes are going to skyrocket.

    I say terminate ALL public-sector defined contribution plans and start over. Distribute a proportionate amount to the Retirees and current participants. Maybe, just maybe, some would see the light. Doubtful.

  9. But, we're talking about Democrat politicians that has promised the moon and the stars while continuing the kick the can down the road.

    Have you seen Ryan's Medicare plan? Same thing but it four or five orders of magnitude bigger.

  10. joke of the Day
    what do you call a blog that typically has no comments
    to their far left postings.Two political junkies???

  11. CM - The private sector and the public sector are both the real world. They both have their absurdities and their alleged virtues.

    The fact that it's not just a City problem (although it is fairly big and bad here) just might be what's leading some to believe that if we ride it out until everyone else has their own crisis, a Big Solution will come along. To me, that sounds like putting too much faith in Harrisburg to enact wise, comprehensive, adroit legislation.

  12. I'm thinking when Harrisburg the city goes bankrupt that at least legislation will get more realistic.

  13. Ooops, I meant to say defined BENEFIT plans, not defined contribution plans.

  14. I got that from context and I have a defined contribution plan myself. As I've switched jobs a bit, it has probably helped me so far. What I don't understand is how they work from a societal prospective. In a large enough group, an actuary can very reliably tell you the distribution of the ages at which people in the group will die. For an individual, you don’t get to try to model a distribution but instead must predict for a single case. Therefore, with a defined contribution plan, you’ve transferred the risk of longevity to individual who can only protect against it by saving as if he or she were going to live to some very great age. In other words, defined contribution plans, if they are really to be universal, would require a much higher funding rate than a defined benefit plan run on the same assumptions about returns/lifespan/etc. Switching only makes sense if you are planning on creating a mechanism for a defined contribution plan with a group benefit (something which does not exist to my knowledge) or greatly increasing the funding for pensions. Or if you’re just looking to frack with people as a way to get votes.