As many of you may have heard, Jan. 1, 2011 was a state mandated deadline for our city to fill its pension fund to 50 percent, or face a mandatory state takeover of our pension system. This takeover would have cost city taxpayers over $1 billion in additional funding over the next 30 years. With just hours to spare, the City Council was able to put together a plan that will avoid the state takeover, while providing an unprecedented level of committed funding to the pensions, and avoiding any major budget cuts or tax hikes.
What we put together is called a revenue covenant - where the city commits additional revenues into the pension fund every year for a set period of time. All told, we will be paying a total of $736 million into the fund above and beyond what we are required to pay over the next 31 years. If you calculate the inflation out of those payments (current dollars are worth a lot less in the future) we deposited $253 million into the pension fund with this plan. Additionally, we deposited $45 million from a special reserve fund into the pension, for a total of $298 million deposited into the fund. This is approximately $90 million more than what was required by the state to avoid the takeover, who will officially certify the funding level in September.
This plan will have an impact on our operating budget - we promised revenues to pension and now we have to make room for that revenue on our ledger sheets. To do this, the city has enacted a schedule of minor parking meter increases. While some neighborhoods are more affected than others, in Beechview and Brookline the meter rates will increase from 50 cents an hour to $1 an hour at some point over the next five years. Citywide these rates equate to an increase that is half the size of what was proposed by the mayor’s privatization plan.
I believe this is the best solution to avoiding the colossal burden of the state takeover. We didn’t privatize any crucial public assets, we didn’t approve catastrophic parking rate increases, we didn’t incur any new debt, but we did make a promise to our workers that we would stand by their pensions - a promise that I was proud to make. Police officers and fire fighters do not receive Social Security; they and their families rely on all of us to do the right thing by them.
On New Year’s Eve, City Council met to override the mayor’s veto of this plan, and we did it by a 9-0 margin. That shows that the most responsible solution to our pension fund won’t be found in a high stakes privatization, or by massive one-time lump sum payments into the fund (which has been tried and failed in the past.) We will fix the fund by doing what so many household do everyday - drafting a reasonable budget, making our annual payments on time, and being responsible with our money. But this isn’t the end of the discussion - I look forward to working with Harrisburg and our labor unions to enact sensible reforms to keep our pension fund sustainable into the future for years to come.
Please don’t hesitate to contact my office at (412) 255-2131 about this or any other issue.