PICA to city officials: Do something about the pension crisis
The Pennsylvania Intergovernmental Cooperation Authority passed a resolution today asking that city officials, the pension board and the municipal unions address the city’s pension crisis.
The Pennsylvania Intergovernmental Cooperation Authority passed a resolution today asking that city officials, the pension board and the municipal unions address the city's pension crisis.
The resolution came in response to an Inquirer article earlier this month that looked at the impact of the pension fund's woeful returns. PICA chairwoman Suzanne Biemiller said that the board is concerned about future of the fund. The pension fund has less than half the $11 billion it needs to pay the bills.
"We felt as a board that we wanted to remind the administration and City Council and others of PICA's interest in this topic and to respectfully suggest that all parties work together for this very serious matter," Biemiller said during Tuesday's board meeting.
The Inquirer reported that fiscal year 2015, which ended June 30, finished with a return of only .8 percent: $37.4 million. It had originally assumed a rate of return of 7.8 percent, earning $365 million. Fiscal year 2016 is looking much worse. By the end of December, the $4.68 billion investment fund had lost 4.75 percent of its value, which equals to roughly $220 million.
In its resolution, the city's fiscal watchdog asked that the recommendations the authority made last year in its 62-page pension report be adopted in some way—through legislation, administrative action or collective bargaining. The board believes such measures would ensure the financial stability of the pension fund.
The resolution summarizes eight stark facts about the pension system including that the pension fund is less than 46 percent funded and that number is expected to drop even more given the poor returns in fiscal year 2015 and so far in 2016. PICA also noted that city employee contributions into the fund are low in comparison with other cities and it advocates for all new employees to be required to enter into the city's hybrid pension plan known as Plan 10.
"The savings to the city would be substantial and would enable the City to devote additional resources to ensuring the financial stability of the pension system for the long term," the board wrote.
In addition, some of the board members spoke about their distaste for two pension perk programs- The Deferred Retirement Option Plan (DROP) and the Pension Adjustment Fund.
Board member Alan Kessler asked if there was any "movement" to do away with the pension adjustment fund, which shares pension fund profits with retirees when the fund has made more money than expected. No one answered.
Mayor Kenney, who as a councilman introduced legislation that took away the requirement that the pension fund be at least 76 percent funded before bonuses are given out, has defended the practice.
When asked how Philadelphia's fund compares overall to those of other major cities, city finance director Rob Dubow said it is low.
"It's low relatively. It's low absolutely. It's obviously a big problem," Dubow said.
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