This week, Pittsburgh Mayor Bill Peduto criticized Gov. Wolf’s plan to sell $3 billion in pension obligation bonds. In a meeting with editors and reporters from the Pittsburgh Tribune-Review, the city’s Democratic mayor explained that this same plan nearly led Pittsburgh into bankruptcy and that:
“One out of every $5 we spend every year just goes back to paying those old bonds. Not only that, but our debt ratio is higher than New York City's when they went bankrupt.”
With Pittsburgh facing a $1.2 billion pension obligation, Peduto said “[t]here has to be a new mechanism from the state in how pensions are paid.”
Luckily, there is.
Peduto, along with a number of mayors and local government officials, supports state legislation that would reform the municipal pension plans. Specifically, these bills would put new employees into a 401k-style plan, and move pensions out of the collective bargaining process. There is a growing bipartisan support for municipal pension reform across the commonwealth.
And Peduto is far from alone in criticizing Gov. Wolf's ill-conceived pension obligation bond plan. Financial experts and rating agencies across the country have warned against using pension bonds to try to repay debt with more debt. Many cities, like Pittsburgh, and several states have tried to use pension bonds to get out of a bad financial situation—it hasn't worked yet.