Philadelphia's fiscal watchdog has called for city officials, the Pension Board, and the city's municipal unions to do something to address the looming pension crisis.
"We felt as a board that we wanted to remind the administration and City Council and others of PICA's interest in this topic and to respectfully suggest that all parties work together for this very serious matter," Suzanne Biemiller, who chairs the Pennsylvania Intergovernmental Cooperation Authority, said during Tuesday's board meeting.
The pension fund has less than half the $11 billion it needs to meet its obligations to the city's retirees, and this month the Inquirer reported that the fund had earned just 0.8 percent on its investments - $37.4 million - in fiscal 2015, which ended June 30. The fund had originally assumed a rate of return of 7.8 percent and earnings totaling $365 million.
Fiscal 2016 looks worse. By the end of December, the fund's $4.68 billion in investments had lost 4.75 percent of its value.
On Tuesday, the PICA board adopted a resolution asking that the recommendations it made last year in a 62-page report be adopted in some way - through legislation, administrative action, or collective bargaining.
Among the recommendations were that all new employees enter the city's hybrid pension plan, which resembles a 401(k), and having workers contribute more to their current plans. The board also recommended doing away with two pension perks: the controversial Deferred Retirement Option Plan (DROP), and the Pension Adjustment Fund, which gives retirees bonuses when the fund earns more than expected.
"The savings to the city would be substantial and would enable the city to devote additional resources to ensuring the financial stability of the pension system for the long term," the board wrote.
When board member Alan Kessler asked whether there was any movement to do away with the pension adjustment fund, no one answered.
Mayor Kenney, who as a councilman introduced legislation that took away the requirement that the pension fund be at least 76 percent funded before bonuses are given out, has defended the practice.
City Finance Director Rob Dubow said Philadelphia's fund balance was lower than those of other major cities.
"It's low relatively. It's low absolutely. It's obviously a big problem," said Dubow, chairman of the Pension Board and an ex-officio member of PICA's board.