Pittsburgh Avoids Pension Takeover

(September 19, 2011) – The Steel City has avoided a state takeover of its beleaguered pension fund.

With a 62% funding status, according to statements by the Pennsylvania’s Public Employee Retirement Commissioner to Reuters, Pittsburgh has avoided the takeover, which would have occurred if the system was below a 50% funded status as of the end of August. Under the state’s laws, management of municipal retirement systems become the responsibility of the state if these plans have less than 50% of the assets needed to meet liabilities.

It has not been an easy journey for the pension plan. Fierce political infighting among city Democrats has caused multiple funding proposals to fail, starting with Democratic Mayor Luke’s Ravenstahl’s proposal to raise funds through a sale of the city’s parking garages. “We need $220 million by the end of the year,” Ravenstahl told aiCIO in late 2010. “If we fail, the state takes the assets. They would manage the fund, and they will send a bill every year, saying our minimal municipal obligation (MMO) is X. We calculate that at being $30 million more than the $45 million we pay right now. That comes from the taxpayers.”

While his plan eventually failed – City Council rejected it in December 2010, replacing it with a last-minute deal that dedicated future parking revenues towards the fund – the city was able to raise its funding levels in time to meet the August cutoff date.

The pension has, however, weighed on other parts of the city’s finances. In April, Standard & Poor’s downgraded the city’s debt. “We revised the outlook based on our view of Pittsburgh’s increased financial pressures associated with the city’s pension system,” company credit analyst John Sugden-Castillo said in a release at the time. Mayoral spokeswoman Joanna Doven told aiCIO at the time: “Markets don’t like uncertainty. City Council’s irresponsible actions put Pittsburgh and its residents in a state of great financial uncertainty.”