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State taxpayers should not bail out Pittsburgh, Philadelphia pensions

A small item that appeared in newspapers across the state recently could mean bad news for Pennsylvania taxpayers, if a few big-city politicians have their way.

The story explained that top officials from Pittsburgh, Allegheny County and Philadelphia were planning to lobby in Harrisburg for financial assistance from the state, to help beef up underfunded public-employee pension funds.

That should never happen. And voters, and the media, should be watching to make sure that it doesn't.

A study released last month by the Pew Charitable Trusts and the Economy League of Greater Philadelphia revealed a looming pension crisis where employee pension costs are rising faster than city revenues.

Both Pittsburgh and Philadelphia have public employee pension funds that are severely underfunded. Philadelphia has about 52 percent of the money it needs to fully fund its pension obligations. Pittsburgh is in worse shape, with just 44 percent of the money needed to pay expected pension benefits.

Both cities, notably their past political leaders, are responsible for the pension troubles they now are facing. Promises were made to city workers with apparently little concern for what those promises would cost and how they would be paid for.

The pending pension crises in Pittsburgh and Philadelphia are reminders of the notorious legislative pension grab of 2001, in which state lawmakers took a temporary pension fund surplus and used it to boost their own pensions by 50 percent. At the same time, to gain broader political support for the move, lawmakers also increased pensions for all state employees, including public school teachers, by 25 percent.

Due to the ill-advised, badly timed and selfish pension grabs that took place in Harrisburg, financial forecasts predict that school districts across the state likely will have to impose dramatic property tax increases to pay for the unwarranted pension increases of 2001.

A similar problem exists in Philadelphia and Pittsburgh. The negotiators for city government allowed overly generous pension deals to be approved. Because these cities are responsible for the messes they are in, they and their citizens should have to find a way out. The best solution would be to roll back pension benefits and increase employee contributions. But such moves would be controversial and contentious. The other options include raising taxes and cutting city services.

Employee pension and health care costs amounted to 16 percent of Philadelphia's budget in 1998. Those same costs are projected to eat up about 28 percent of the city's budget by 2012.

Making Philadelphia's pension crisis worse is the low contribution required of city workers. The pension study found that Philadelphia's contribution rate of just 1.85 percent of a worker's annual salary was less than the contribution rate of any other city in the study, except Baltimore. The scope of the Philadelphia shortfall can be seen in the 9 percent contribution being made by San Francisco workers and the 7.5 percent contribution being made by Boston city workers to their pension.

Philadelphia also paid more for health care costs per retiree than any other city surveyed in the study.

The Pew report noted that in 2006, Philadelphia was paying pension benefits to 33,900 people, despite having only 28,700 employees. The gap between the number of people receiving benefits and active city employees is expected to widen in coming years. Those numbers spell big trouble for the city's finances.

Early retirement offers and unusually generous pensions have combined to produce crippling burdens on taxpayers. The Pew report noted that in Pittsburgh, "the city is making payments to fulfill obligations to sanitation workers who picked up garbage in 1983 and to police detectives who apprehended muggers in 1977." Clearly, some people are receiving pension payments for as many, or more, years than they were working. Such a condition is unsustainable.

There are many pension crises to be dealt with across the state and nation. But public officials and unions in Philadelphia and Pittsburgh created these problems — and they should not expect taxpayers in other parts of the commonwealth to bail them out.

Taxpayers across the state should let their legislators in Harrisburg know that there should be no state bailout for these big-city pensions.

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