Council gave away the store
As a story about the expected shortfall in the city’s pension fund pointed out, the fund paid $61 million in bonuses to three-quarters of its 30,000 retirees last year (“Investment losses hurt Phila.’s future,” Monday). That payment was required by a law conceived, drafted, and sponsored by Mayor Kenney in 2007, when he was a city councilman.
Mayor Street’s veto of the measure was overridden by City Council. In the face of Council’s strident opposition, Mayor Nutter had to abandon his attempt to restore a long-standing limitation on payment of the bonus unless the pension fund’s obligations were at least 76 percent funded.
Ideally, the fund should have retained the money to decrease its underfunding. Or perhaps the School District could have put the money to good use. Or the money could be used to fund the mayor’s pet pre-K project, since he certainly has no clue as to what the source of that money will be.
Add the bonus to rewards such as the Deferred Retirement Option Plan (DROP) boondoggle that ward and one-party politics have bestowed on city workers. Taxpayers be damned.
Not one mention of the biggest pension problem that has long outlived it’s original intention – DROP. The drain on the pension assets will never be recovered in our lifetime.
Switch investments to major firm
Mayor Kenney might consider doing something the pension fund has not yet tried: invest through one or more of the major mutual fund companies. From the limited information available on the fund’s website, most of the investment companies are obscure names, their fees are much higher than the approximate 0.5 percent that major companies charge, and their investments and performance are not listed.
Montgomery County’s fund was in similar straits. The county switched to the Vanguard Group and earned 7.99 percent the first year, while the city’s fund barely broke even. There are no guaranteed returns, but major companies have performed consistently well over the long run.
|Matthew Augustine, Philadelphia, firstname.lastname@example.org