DN Editorial: Ain't we got fund

ONE REASON we supported the sale of the Philadelphia Gas Works to a private utility was that the proceeds would have gone into the city's pension fund for its employees.

It would have given an estimated $500 million shot in the arm to the anemic fund, which has a long-term deficit approaching $5 billion. In the jargon of the pension world, it is called an unfunded liability - the difference between what is owed to retirees today and future retirees versus the money available to pay them. It's a long-term debt that will slowly come due.

This huge deficit is not a secret. The fund has had this problem for years. Mayor Nutter's PGW sale plan would have given the fund a big infusion of cash.

As we know, City Council scrapped the proposed sale without a word of debate. The PGW deal is dead. So, here's a follow-up question: If the city's not going to give the pension fund a $500 million boost, what is it going to do about its big deficit?

Mum's the word on Council. No one in that chamber has stepped forward lately to try to answer that question. Maybe they believe if they close their eyes real tight the problem will disappear.

To his credit, Council President Darrell Clarke floated an idea last year to use sales-tax revenue to feed the fund. Instead, that tax money was diverted to the school district, which was desperate for cash. Then came the Nutter PGW idea, which Council shot down.

Now, the state oversight board that oversees the city's finances has stepped forward and offered a series of proposals to help the fund. When Pennsylvania Intergovernmental Cooperation Authority, (PICA) speaks, the city should listen. The board has the power to approve or reject the city's budget and shut off access to state tax revenue if it disapproves.

It has yet to use that power, but the city's elected officials should take heed when PICA sends up a wake-up call for the city to deal with its pension-fund problems.

Why should we care about this obscure and thorny issue? Because taxpayers will have to pay the difference between what the fund has on hand and what it needs to spend. In a sense, we've already been paying for years. Ten years ago, seven cents out of every dollar spent by the city went to feed the pension fund. Today, it is 15 cents on the dollar.

Every penny spent to feed the pension kitty is money diverted from city services.

PICA believes that the situation could worsen in the future unless something is done today to change the downward path the fund is on.

Those recommendations include requiring city employees to contribute more of their salaries to their fund (our employee contribution rate is among the lowest in the nation); eliminate the notorious DROP early retirement program; and requiring new employees to join a cheaper hybrid plan, which combines a traditional pension with something resembling a 401k.

Finally, it recommends creation of a Pension Study Commission - which would include experts and taxpayers - to devise a formal, comprehensive plan to set the fund right.

Normally, we are skeptical of study commissions, whose reports usually end up collecting dust on the shelf. But, we would favor this idea if PICA would use the commission's report to pressure the city to act.

Someone has to make the politicians open their eyes and confront the real problem before it eats up the city budget.