There are two workable solutions.
It’s possible that we ought to, need to, and only can do both.
A CNBC.com analysis shows that more than 120 of the country’s biggest state and local pension plans contain a range of problems. “Thanks to a patchwork of accounting practices and rosy investment assumptions,” according to the report, it’s unclear just how bad off they are.But based on adjusted funding gaps, Pennsylvania and nine other states “would see their funding liabilities exceed an entire year’s worth of state revenues,” according to the report. (Trib Editorial I)
The severity of these coming waves of pension crunches are not really in dispute, and these are certainly no strangers to the City of Pittsburgh.
The zombie invasion we fended off in 2010 is bound to return having worsened. And although we like to celebrate operating budget surpluses, better credit ratings, a “debt cliff” coming in
2017 2019 if (we can hold out) along with the ability to boost the capital budget some… we talk less about our pension burden because it’s less scary and impossible.
Avoiding disaster in Pennsylvania begins by getting the Legislature off the dime and shifting new state employees and public school teachers from a defined-benefit to a defined-contribution plan — which should have been done years ago. (ibid)
Boy, this takes me back. Many conservatives cry “Tear up the contracts,” but in the autumn of 2007, Mark DeSantis cried “Switch to defined contribution plans!” and it struck us as not grievously insensible.
It’s a different economy than in the postwar boom, and has remained mean for a long while. The cost of health care in particular has become exceedingly prohibitive when not distributed. Do hold the line for retirees and workers under a contract, as if we have any ethical choice. But for new hires into the future? If we get clearance from the State? Who knows? It’s worth thinking about.
The [Pittsburgh Post-Gazette] editorializes that Detroit’s bankruptcy somehow is a clarion call for “a new urban agenda,” one that “can be a prescription for national prosperity.” But as the Allegheny Institute for Public Policy reminds, “Calling for a new urban agenda is just a dreamed up politically correct scheme to avoid dealing with disasters created by earlier statist schemes.” (Trib Takers)
What is their beef this time?
No one should expect a Marshall Plan for cities, but the federal government must become a stronger partner. States, too, must develop urban policy agendas to grow. Unfortunately, too many states have cut aid to local governments while pursuing a myopic development strategy that focuses largely on tax cuts.Money for transit systems, regional economic development, public safety, housing, education, health care and job training are investments in solving not just the problems of cities, but also those of the nation. (P-G, Editorial Squad)
Yup. Easy to see how conservatives would recoil from that as though from sunshine. (And so, politics being the art of the possible, there is little danger of next Great Society breaking out any time soon.)
Peduto said the state’s formula for giving cities state pension aid favors newer cities because it’s based on the number of active employees, not retirees. Newer municipalities have fewer retirees, he said, but receive generous contributions. (Trib, Sidebar Bauder)
This suggestion is by no means new either to Bill or to the discussion table. But Pennsylvania’s pension aid formula is so obviously slanted and out of whack, it can’t do it’s job providing a baseline of governmental stability.
You want to talk about “moral hazard”: what about the city worker who votes her own pocketbook interest for 20-30 years, then retires with that pension and benefits package, but moves the family to the suburbs (as a great many did) thereafter contributing very little in taxes to support their new town’s workers thanks to the slanted and inefficient State pension aid formula, flush with funds from metro area tax receipts? This isn’t an ideological problem, it’s math and logic.
More importantly, Comet readers: are we crazy or are there the makings of a deal here? Encourage defined contribution plans that moderately recognize increasing limitations in public budgets over the last 60 years.. and fix the state pension aid formula to recognize the immutable history of all older cities and our continuing stake in them, and other aspects of a rational “urban agenda”.
These pension reckonings are so significant, we might need to “fix” them twice in order to actually fix them once, but good.