Auditor General Jack Wagner Says Pittsburgh Pension Plans Severely Underfunded Even with New Parking Tax Revenues
Urges all options to be considered for fixing state's second-largest plan
HARRISBURG, Pa., May 24, 2011 /PRNewswire-USNewswire/ -- Auditor General Jack Wagner said today that the city of Pittsburgh's pension plans for uniformed and non-uniformed workers are severely underfunded and that additional concrete steps must be taken to boost contributions and protect pensioners, taxpayers and the city's municipal bond rating.
Wagner released an audit today that showed the consolidated plans for police, firefighters and non-uniformed personnel were only 34 percent funded as of Jan. 1, 2009. City council adopted a bailout plan in December 2010 that would boost funding to 50 percent and avert a state takeover that would be mandated by Act 44 of 2009. Wagner noted that, although Public Employee Municipal Retirement System is responsible for determining if the minimum 50 percent funding threshold is met, his office has not seen any other evidence supporting the establishment of the revenue stream besides the city ordinances. But even with those additional funds, derived from parking tax revenues, the pension plans would still be severely underfunded, Wagner said.
The city of Pittsburgh's consolidated pension plan is the second-largest in the state, covering police, firefighters and non-uniformed workers.
Wagner said that 71 pension plans in the state are severely underfunded, meaning they are less than 50 percent-funded. The anticipated infusion of parking tax revenues would boost Pittsburgh's pension plans to just a fraction over 50 percent, at best. While the mayor and city council continue to disagree on a funding source, confidence in the city's ability to address this issue and others is eroding. The plan implemented by city council in December 2010 does not have the cooperation of the mayor and the city's parking authority.
"The Steelers' offense doesn't quit and declare victory after it has crossed the 50-yard line," Wagner said. "Neither can city council or the mayor stop moving forward simply because the pension plans might have reached the bare minimum fifty percent level required to prevent a state takeover under Act 44. They still remain seriously underfunded without a clear solution in sight."
Act 44 of 2009, the Municipal Pension Plan Funding Standard and Recovery Act provides for the implementation of a distress recovery plan for municipal pension plans, including three levels of distress with established funding criteria (level I, minimal distress, or 70-89 percent funded; level II moderate distress, or 50-69 percent funded; level III, severe distress, less than 50 percent funded).
According to Wagner's audit, the City of Pittsburgh pension plan as of Jan. 1, 2009 reported assets of $339.1 million and liabilities totaling $989.5 million.
Wagner noted that at least one bond-rating agency, Standard & Poor's, has revised its financial outlook for Pittsburgh from "stable" to "negative" because of continued uncertainty about the city's pension debt. A lower bond rating could lead to higher interest payments on city debt, Wagner said, benefitting Wall Street banks at Pittsburgh taxpayer expense.
"City officials must realize that there are no short-term fixes and that they must make fiscally responsible decisions that will benefit the City of Pittsburgh and its taxpayers, to ensure that the pension plans have adequate resources to meet current and future obligations."
Wagner's audit said that city officials should consider all options, including turning its pension plans over to the Pennsylvania Municipal Retirement System, to develop the strategic plan needed to fix the pension crisis once and for all.
Routine audits completed by the Department of Auditor General of pension plans across the state have found that the issue of pension plans providing members benefit provisions in excess of state
law has been one of numerous contributing factors in the funding deficits faced by pension plans throughout the state.
Wagner said that, although a state takeover by PMRS could not legally stop the issuance of excess pension benefits, it would provide an additional level of defense by better positioning PMRS to exercise more public pressure by shining a light of transparency to neutralize such actions.
Wagner's audit of the city of Pittsburgh pension plan, which covered the period Jan. 1, 2007 to Dec. 31, 2009, cited the pension plan for failing to address previous audit findings that found the plan provided benefits that were inconsistent and conflicted with plan collective bargaining agreements.
Wagner said that inconsistent plan documents could result in inconsistent or improper benefit calculations, incorrect benefit payments from the pension plan, and incorrect state aid allocations or incorrect funding of the plan pursuant to Act 205 requirements. Wagner urged municipal officials to amend the plan's governing document, as necessary, to reflect all benefit obligations of the pension plan and eliminate inconsistencies among the various plan documents.
A complete copy of the City of Pittsburgh Comprehensive Municipal Pension Trust Fund audit report is available at www.auditorgen.state.pa.us.
Auditor General Jack Wagner is responsible for ensuring that all state money is spent legally and properly. He is the commonwealth's elected independent fiscal watchdog, conducting financial audits, performance audits and special investigations. The Department of the Auditor General conducts thousands of audits each year. To learn more about the Department of the Auditor General, taxpayers are encouraged to visit the department's website at www.auditorgen.state.pa.us.
SOURCE Pennsylvania Department of the Auditor General