House Committee Explores Pittsburgh’s Municipal Pension Challenge, Says Petri
PITTSBURGH -- Rep. Scott Petri (R-Bucks), majority chairman of the House Urban Affairs Committee, was in Pittsburgh today where he held the first of several statewide public meetings to find solutions to Pennsylvania’s $7.75 billion municipal pension funding problem.
“Clearly each municipality has its own unique challenges, but there is also a lot of common ground,” said Petri. “We are here to listen, learn and ultimately craft laws that will provide some relief.”
According to a recent report by the state auditor general, 562, or nearly half, of Pennsylvania’s 1,223 municipalities administer pension plans that are so underfunded that they threaten the solvency of the municipalities and the stability of those who are relying on current or future retirement benefits. Pittsburgh ranks second in the state, behind Philadelphia, with $485 million in unfunded pension liability.
Brian Jensen, executive director of the Economy League of Greater Pittsburgh, said laws governing police and fire pensions and binding arbitration are making it difficult for municipalities to implement the reforms necessary to get them back on solid financial footing.
He said pension laws also need to reflect today’s realities – most notably – changes in life expectancy. The retirement age in many police departments is 50, just as it was in 1930 when the average life span was 72. Today the average life expectancy is 80, which means retirees are receiving payouts over a longer period. City Council President Bruce Kraus said raising the retirement age for public safety employees from 50 to 55 would save Pittsburgh taxpayers $300 million in today’s dollars.
Representatives of the Fraternal Order of Police and state firefighters union cautioned that law enforcement and firefighting is “a young man’s game,” and many municipalities require early retirement, which shortens the time necessary to acquire a sufficient retirement asset. Les Neri, state president of the FOP, said retirement benefits are capped at 50 percent of a retiree’s final average salary – regardless of length of service.
Natalia Rudiak, who chairs Pittsburgh City Council’s Finance and Law Committee, said state subsidies, intended to help distressed municipalities, are now available to all municipalities with a pension program, which means some affluent communities are receiving subsidies for pension plans that are fiscally sound. Consequently, Pittsburgh and other financially distressed municipalities are receiving less funding as their pension obligations grow.
Many municipalities are faced with selling assets to cover their pension liabilities, but Pittsburgh Mayor Bill Peduto said that eliminates valuable ongoing revenue streams that could help solve the funding shortfall. Peduto said the city hired a consultant to look at a plan to lease city parking facilities. He said the plan would have cost city taxpayers billions of dollars. Peduto echoed suggestions to increase the retirement age of municipal employees, increasing state aid for distressed municipalities and to shift new employees away from the current defined benefit plan.
“Pittsburgh has made great strides in the past 10 years and its municipal pension system is presently funded at 58 percent. While it remains severely distressed, that is a significant improvement,” said Petri. “I was pleased to hear concrete solutions offered by the Pittsburgh officials who testified today. They made some thoughtful and weighty suggestions on how to further improve their pension situation. These suggestions, and those from similar meetings planned in other municipalities, will provide a firm basis for debate on the issue as we move forward.”
Representative Scott Petri
178th District
Pennsylvania House of Representatives
Media Contact: Donna Pinkham
717.260.6452
dpinkham@pahousegop.com
RepPetri.com