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Politics & Government

Local Lawmakers Say State Needs To Do Its Part To Fix Municipal Pension Underfunding

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Irina Zhorov
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90.5 WESA

Municipal pension funds in Pennsylvania are underfunded by a combined $7.7 billion, and many local lawmakers are pointing to state-level reforms as the solution. 

The State House of Representatives’ Urban Affairs Committee met with local leadership in Pittsburgh Monday to learn about what exactly municipalities want to see happen in the state Legislature.  

Pittsburgh Mayor Bill Peduto compared the municipal pension problem to a sinking boat.

“It’s sort of like being in a boat where the hole in the bottom is greater than the barrel that you have,” he said. “And you can continue to try to take the water out of the boat, but the boat continues to sink. Under the current system our current employees will not be able to receive their pensions.”

Peduto said the city has taken steps to plug up its damaged vessel, but he and city council members said further reforms need to come at the state level. Myriad state laws shape how municipal pension are managed and what they provide. Peduto wants to see state laws raise the minimal retirement age to reflect longer lifespans, shift to a different system for new hires, set consistent employee contributions, mandate more realistic rates of return and eliminate the use of overtime in calculating pensions.

Councilwoman Natalia Rudiak focused her testimony on the state aid formula. Under Act 205, the state gives money to municipalities to help them meet pension payments, but Rudiak said the formula boosts smaller, wealthier municipalities at the expense of distressed ones. She said while distressed communities like Pittsburgh are receiving less and less state aid, fiscally sound jurisdictions like Upper St. Clair are receiving enough to cover their entire yearly payouts.

The meeting was the first in a series around the state as legislators plan to introduce reform legislation.