State must keep pension funding at its forefront
The front page of Tuesday’s Wall Street Journal provided the troubling news that state and local pension shortfalls are hitting retirees with little time to engineer what the Journal described as a “Plan B.”
“Many cities and states can no longer afford the unsustainable retirement promises made to millions of public workers over many years,” the article said, continuing that “by one estimate they are short $5 trillion, an amount that is roughly equal to the output of the world’s third-largest economy.”
Underfunded pension plans are not a problem limited to states like New York and California. In fact, Pennsylvania has been one of the nation’s worst in terms of pension-plan underfunding.
More than 3,000 local government pension plans exist in this state, with about 2,600 of those being municipal plans, among which about one- third are said to be less than 80 percent funded.
Underfunded pension plans can be described as a ticking time bomb for taxpayers of all areas of the commonwealth.
Blair County government engaged in a dangerous practice for the eight years leading up to 2008. During those years, county government made no contributions to the county’s pension fund, while harboring what now can be described as the foolish belief that investment income and employee contributions were enough to keep the plan on sound financial footing.
The county commissioners in office in 2008 realized the need for a more responsible pension-funding attitude, and during budget preparation for 2009 began by allocating $200,000 for that purpose.
County government continued that practice through 2012.
Commissioners budgeted no pension-fund contribution for 2013, but money from the sale of Valley View Home has enabled the county to reduce the pension fund’s net liability by about $14 million — to $74.8 million.
No doubt there are counties in this state that envy what Blair has been able to do on the pension front, but the accomplishment would not have been possible without the Valley View Home sale.
Pension funding is an issue that must remain in the forefront in future years, and county residents need to be apprised annually regarding the condition of the fund, with emphasis on how much or how little the county has contributed to it.
A Mirror article on June 27 quoted Commissioner Terry Tomassetti as saying the county will need to look at an increase in its pension contribution every year until the condition of the fund gets to the level that it needs to be. This year’s contribution is $4 million.
The county’s mid-year financial report released Tuesday indicates a healthy fiscal foundation upon which such action could be forthcoming.
But, going forward, it’s important for this and all other counties, as well as individual municipalities, to heed a message delivered at a recent seminar attended by Commissioners Chairman Bruce Erb. The message: “You can’t invest your way out of a pension deficit.”
There must be ongoing local contributions to help offset the money being paid out to retirees.
On Tuesday, the Wall Street Journal said state and local pension plans in the U.S. now have less than three-quarters of the money that they need to meet their pension obligations, the lowest level since at least 2001.
Fortunately, Blair is ahead of many in acknowledging the seriousness of the problem and, more importantly, committed to repairing its share of it.