May 13, 2011
The head of a state agency that will decide whether Pittsburgh’s pension system is healthy enough to remain under the city’s control said yesterday that he’s worried that city council’s last-minute attempt to avoid a state takeover will lead to more trouble.
“I don’t know why they did it without professional assistance, but apparently they did, and now I’m worried they didn’t do it right,” said James McAneny, head of the Public Employee Retirement Commission. “No one has bothered to notify us exactly what they did.”
Pittsburgh Controller Michael Lamb told the city’s pension board he will forward paperwork to McAneny that shows the funds have a projected value of nearly $572 million when accounting for parking tax revenue going into the system.
“Our lawyers have looked at this, and we are confident (council) has created an asset,” Lamb said.
The city must demonstrate to McAneny in a report due Sept. 1 that it has a plan to cover at least 50 percent of $1 billion in obligations to 7,000 employees and retirees. The other option is a takeover, which city officials warn would have a crippling effect: annual pension payments to the state topping $100 million.
Last fall, council struggled with several plans to fund pensions until deciding at the Dec. 31 deadline it would designate parking tax revenue for the system to the tune of $13.4 million annually through 2017, then $26.7 million through 2041.
McAneny said the pension system is unattractive, regardless.
“Nobody wants it,” McAneny said. “It’s got a negative cash flow, it spends more than it takes in, and it’s underwater because it has more retirees than active employees.”
Lamb said the city will put about $60 million into the funds this year but pay out about $80 million, and will count on good market conditions to make up the difference.
According to figures released yesterday, the funds essentially broke even in the first quarter of the year, starting at $332.4 million and ending at $333.5 million.
At issue in the system’s long-term viability is whether council created an asset when it dedicated parking taxes to the system.
In April, McAneny asked the city for proof. Ravenstahl, who proposed funding pensions by privatizing the city’s parking assets, replied in a Tuesday letter, “We are just as unclear as you are.”
McAneny said he has a message for the city: He can’t wait for a resolution.
“Please give me this stuff in advance before we make ourselves nuts worrying about this,” he said. “If we wait until Sept. 1, there’s no way (the retirement system) can take over administration in two months.”
Pension board member Joe King, head of the city’s firefighters union, urged city officials to get behind Lamb’s numbers to present a united front. He also urged speed in getting all necessary paperwork to McAneny’s agency.
“There ain’t nothing on your calendar more important than this,” King said.
The system’s executive director, Scott Kunka, said he wanted to study Lamb’s numbers first. Kunka is Ravenstahl’s finance director.
Henry Sciortino, executive director of the Intergovernmental Cooperation Authority — one of two state agencies that oversee the city’s finances — said he hadn’t seen Lamb’s report.