Panel Pursues Municipal Pensions Reform




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Panel Pursues Municipal Pensions Reform

By Debra Erdley, Pittsburgh Tribune Review

September 9, 2008

The solution to Pittsburgh's ailing public pension funds might lie in a complete overhaul of Pennsylvania's fragmented municipal pension system.

Experts and municipal officials told lawmakers with the Senate's joint Finance Committee and Urban Affairs and Housing Committee that the state is overdue for a comprehensive pension overhaul. Pennsylvania has 3,129 municipal pension plans, or 25 percent of those nationwide.

If there's a need to make changes at the state level, "we're open to it," said Republican Sen. John Pippy of Moon, who chaired the hearing Monday at the University of Pittsburgh.

Pittsburgh Mayor Luke Ravenstahl -- whose administration is dealing with three employee pension plans with a collective unfunded liability of about $1 billion -- told the panel that demographics and state reimbursement levels have worked against efforts to address the issue.

Ravenstahl chairs a statewide committee of municipal leaders that is working on a four-point plan for pension reform. He said the committee would like to revise state pension reimbursement levels; bar overtime pay from pension calculations; allow for consolidation of municipal pension plans; and permit municipalities to offer defined-contribution, 401k-type plans.

"It's not a problem unique to Pittsburgh, but is a problem we are facing throughout the commonwealth and nationwide," Ravenstahl said.
Eric Montarti, an analyst with the Allegheny Institute for Public Policy in Castle Shannon, suggested a one-time infusion of money -- such as from the sale of the state liquor stores -- could help reduce unfunded liabilities and set the stage for other changes.

Montarti said Pittsburgh isn't in immediate danger of defaulting on its pension obligations. "But it's going to push it off on future generations of taxpayers," he predicted.

Consolidation could benefit even those plans that are fully funded, experts said.
Brian Jensen of the Pennsylvania Economy League said the average annual cost to administer a pension plan with 10 or fewer members is about $1,400 per person, compared to $250 per person for plans with more than 1,000 members.

Even more significant, Jensen said, is that consolidating municipal pension funds could make it easier for municipalities to cooperate in other areas.
"Fewer, better-funded, better-outfitted and better-staffed police departments would be a happy consequence of a unified municipal pension system," Jensen said.