Despite weathering the 2008 financial crisis relatively unscathed, Philadelphia continues to face a challenge when it comes to controlling pension costs, the city’s Treasurer Nancy E. Winkler explained at the Bloomberg State & Municipal Finance Conference in New York on Nov. 6.
Winkler said during a panel called “View from States & Municipalities” that pension expanses have been a harder budgetary task to tackle than healthcare costs. Philadelphia’s pension system is about 50 percent funded and its interest rate immunization period was reset to 30 years as part of a reform effort following the financial crisis, Winkler explained.
“Since [resetting the immunization] we have been able to make slightly greater contributions then the minimum we are required to make by the state each year, but not a lot,” said Winkler, who received the 2013 Freda Johnson Award for Trailblazing Women in Public Finance.
Winkler said Philadelphia Mayor Michael Nutter is hopeful that if city officials are successful with its planned sale of the Philadelphia Gas Works facility that proceeds can be used to make additional incremental contribution to the pension fund.
The Philadelphia Board of Pensions and Retirement also hired two years ago a new chief investment officer in Sumit Handa from Stamford, Conn.-based hedge fund DKR Capital.
Joining Winkler on the panel was John E. Nixon, budget director for the state of Michigan, who emphasized that his state shifting from a pension to a defined contribution model has been a positive both from a fiscal and hiring perspective.
“We’re able to bring people in in their late 40s, early 50s and realize they don’t have to serve a 30-year career in the retirement system,” said Nixon, who runs Michigan’s information technology department. “While you may not be able to attract employees because you don’t have those long-term benefits, you can also mark yourself to bring people in even on a more temporary four to five 10-year basis.”
