Pittsburgh Gets Extension in House Version of Pension Reform

September 14, 2009 (PLANSPONSOR.com) - The Pennsylvania state House has approved a new version of legislation proposing the Pennsylvania Municipal Retirement System take over municipal retirement systems with less than 50% of the assets needed to meet liabilities.

The Pittsburgh Tribune-Review reports that under the revamped bill, Pittsburgh gets the two-year exemption it sought from the state takeover of its pension system. In addition, the news report said, after unions across the state blasted the Senate version of the bill, the House stripped away all the language objectionable to organized labor.

Pittsburgh is among the roughly three dozen municipalities that could be taken over by the Pennsylvania Municipal Retirement System. Its $899 million plan is 28% funded.

“This is good for Pittsburgh,” said City Council President Doug Shields, in the news report. “It was clear that if the city had been moved into the previous plan that the payment schedule would have essentially bankrupted the city.” But not everyone agreed, as House Minority Whip Mike Turzai said: “This is nothing more than a Band-Aid, putting off the problem to another day.”

The legislation would dedicate 6.75% of the money Pittsburgh collects from parking to help pay the city’s minimum pension obligation. It would allow the city to increase the tax if it sells or leases its parking garages (see PA Senate Committee Approves State Takeover of Pensions ).

The bill also addresses serious underfunding for Philadelphia’s pension system, allowing the city to raise its sales tax to 8% from 7% for five years, which would raise an estimated $580 million that would be used to pay off pension contributions that the city has deferred.

House Speaker Keith McCall said passing the bill will help Philadelphia meet its urgent and immediate crisis and gives lawmakers “breathing space to take a hard, measured look at the larger issue of underfunded municipal pensions across the state.”