Although Pittsburgh paid more into its pension plans than was required over the past two years, the funds set up to pay employees’ retirement benefits are still struggling to be financially solvent.
The city put $115.6 million into its three employee pension plans in 2014 and 2015, although law only required payments of $74.2 million. But that wasn’t enough to combat the rising cost of pension promises. Pittsburgh’s pension assets grew from $675 million in 2013 to $688 million in 2015, but its pension liability grew to $1.2 billion, representing a pension funding level of 57 percent.
It’s just one more example of how dire the pension crisis is across the state and country.
“Despite paying far more than is required, the pension levels fell further into distress. While some cities are struggling to make their minimum payments, Pittsburgh officials made extra payments, yet the city’s pension plans slid a little deeper toward distress,” said Auditor General Eugene DePasquale, whose office released a report on the pension funds Wednesday.
“Treading water year after year is not the solution. There needs to be a comprehensive solution to the growing statewide municipal pension crisis.”
Pittsburgh had 4,209 pension retirees and 3,161 active employees as of January 2015. As more employees retire, the pension bills are coming due. The plans’ funding levels were 58 percent in 2013. DePasquale considers plans as severely distressed when plans’ funding levels fall below 50 percent.
“Pension plans cannot sustain having far more people collecting benefits than contributing,” DePasquale said.
He also pointed out a common refrain from critics, that the assumed rates of return are too high. Pittsburgh relies on a 7.5 percent return on its pension investments, but only got a 0.04 percent return in 2015. The city has met or exceeded its 7.5 percent goal only seven times in the past 12 years.
The city’s pension fund managers have discussed lowering the assumed rate of return to 7.25 percent or 7 percent, but that would require kicking in even more money either by reducing other budget line items or raising taxes.
“Pittsburgh is not alone, municipalities across the state need to adjust the anticipated return on investment to be more realistic,” DePasquale said.