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Finance chief: City pension fund 'clearly an issue we need to address'

Philly's troubled municipal pension fund is among the least solvent in the nation, according to a new academic study. The study from the Kellogg School of Management at Northwestern University says the assets on hand in Philadelphia's pension fund will be able to pay for pledged benefits only through 2015.

Philly's troubled municipal pension fund is among the least solvent in the nation, according to a new academic study.

The study from the Kellogg School of Management at Northwestern University says the assets on hand in Philadelphia's pension fund will be able to pay for pledged benefits only through 2015.

Study co-author Joshua Rauh also said that pension funds in cities like Philadelphia are increasingly eating up money that could otherwise be used for city services like police or libraries.

"This whole situation does threaten the ability of not just Philadelphia, but the other cities in the study, to provide services at current levels," said Rauh, a professor at the Kellogg School. "Many cities on this list are heading towards serious debt crisis."

But city Finance Director Rob Dubow stressed that the pension fund is not going to run out of cash because the government continues to make payments into the pot.

"It's not a real world hypothetical because there's no way that we're not making our contributions," Dubow.

Still, he added "it's troubling that our pension fund is very weak. We've been saying that for a while. It's clearly an issue we need to address."

The study looks at pension plans in 50 major cities and counties. It says that five other major cities have assets on hand to pay for benefits through 2020 - Boston, Chicago, Cincinnati, Jacksonville and St. Paul.

Rauh said cities like Philadelphia need to shore up funds and curtail the benefits offered to new members.

"The political reality is it is very difficult to make these changes," he said.

Mayor Nutter has repeatedly said he needs to reform the city's pension program to reduce costs.

A new five-year contract reached with the police union, through arbitrators, in December changes pension offerings for new hires. It gives the option of staying in the traditional plan at a higher cost, or choosing a hybrid plan that offers a lower-benefit pension and a 401-k. Nutter has said he wants similar terms for the city's other three unions.

The city's pension fund took a massive hit because of the 2008 stock-market crash, with assets declining by more than $1 billion from mid-2008 to mid-2009.

But the city's overall pension problems date back to the 1950s, when the city started increasing benefits without considering longterm costs. Over the years, the pension has grown into the city's single biggest financial crisis.