Fiscal Watchdog Urges Philadelphia Mayor to Exert Efforts to Avoid Same Fate as Detroit

by San Antonio Attorney

Philadelphia has been advised by Pennsylvania Intergovernmental Cooperation Authority (PICA) to take necessary measures needed to combat its $5.7 billion pension deficit despite hesitation that the city will suffer the same fate as Detroit.

An organization was assigned with the task of preventing the state from going bankrupt and it urged the mayor, council and board for pension fund to pass the legislation as a means to repair the financial problem.

The public pension scheme of Philadelphia, managing 64,000 retirement funds of both current and former employees, bears less than half of the money it requires to compensate for present and future pensioners.  Its total assets are $4.8 billion in 2014.

The funding ratio of the city is a total measure of its assets to the liabilities.  Statistics show that the funding is below 17 out of 21 local pension plans in 10 cities of the United States, according to the Pennsylvania Intergovernmental Cooperation Authority.

Harvey Rice, the executive director of PICA, stated that the government officials of Philadelphia are not exerting any effort in trying to reduce the pension deficit.

Though Philadelphia’s financial status is better than Detroit, a lack of improvement in the pension scheme of Philadelphia will place the city budget at risk.

Rice added that if there is no solution to the pension deficit, it will accumulate to become a bigger percent of the budget.  Public employees should be stipulated to increase contributions to Philadelphia’s benefit scheme.

According to statistics, the pension fund in 2015 for Philadelphia only has 0.29 per cent as compared to 15.7 per cent last 2014.

Detroit recently emerged from bankruptcy last year but last week public pension problems arose due to financial deficit.  The fund will be considered as ‘underfunded’ by $490 million after eight years, according to the mayor.

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