Pittsburgh Mayor Predicts “Financial Nightmare” Brewing

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Mayor Luke Ravenstahl blasted City Council for doing little to help solve the city fiscal woes, while unveiling the current city budget and five-year spending plan. At the core of the problem are the massive pension benefits accruing to city workers that the city has failed to put aside while at the same time making promises to city unions they are now unable to honor.

In order to balance the current budget and those in the next few years, the spending plan anticipates depleting the city’s general fund reserves. “In 2016, the first year following the five-year plan, our fund balance will be depleted,” he said. “We will be forced to make a $91 million payment to the state pension system that is a quarter of the city’s entire budget, and more than it costs to operate any city department. After 2016, I cannot tell you how Pittsburgh will be able to deliver to residents the core services they need without severe cuts and tax increases.”

“With a fund balance that is dried up, Pittsburgh will have to make a $127 million pension payment in 2017. That’s less than seven years away. By 2030, those payments grow to $160 million,” he said. The payments are those that will be mandated by the state in order for the fund to achieve solvency.

The comments made Monday by Mayor Ravenstahl reflect his frustration over the unwillingness of city council to come up with a proper fiscal plan which would enable the pension fund to be properly funded. Under state law, the pension fund must be 50 percent funded; Pittsburgh’s is currently at 27.5 percent, and thus likely to be taken over by the state at the end of the year for noncompliance.

Last month the city council rejected the mayor’s plan to lease city parking garages to a private firm for 50 years and would net the city about $220 million in revenues. The monies would help raise the funded balance in the pension accounts to over 50 percent and avert a state takeover of the fund.

“Council, in opting for state takeover with pension payments in the hundreds of millions of dollars in the near future and nearly $4 billion in payments due over the next 30 years, is forcing us into a financial future that looks too much like our past . . . With this budget and five-year plan, our city walks with its eyes wide open into a financial nightmare. I saw this nightmare coming and prepared the city for it as best I could,” he said.

This year’s city budget is about $434 million and next year’s is estimated to be $450 million.
Pittsburgh Post-Gazette

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