Like a lot of major cities in the United States, Philadelphia is in pretty rough financial condition.
One of the city’s biggest problems is its woefully underfunded public pension, which has a multi-billion dollar funding gap.
In 2001, Philadelphia’s pension fund was still in decent shape with a funding level of 77%, meaning that it had sufficient assets to meet 77% of its long-term obligations.
By 2017 the funding level had dropped to less than 50%.
Part of this is just blatant mismanagement; while most of the market soared in 2016, for example, Philadelphia’s pension fund lost about $150 million on its investments, roughly 3.17% of its capital.
It’s interesting that, along the way, the city has actually tried to fix the problem. Between 2001 and 2017, the amount of money that the city contributed to the pension fund actually increased by 230%.
Yet despite increasing contributions to the fund, the fund’s solvency level keeps shrinking.
Mayor Jim Kenny summed up the grim situation in his budget address last year:
The City’s annual pension contribution has grown by over 230 percent since fiscal year 2001. . . These increasing pension costs have caused us to cut important public services while the pension fund’s health has grown weaker. In fact, our pension fund has actually dropped from 77 percent funded to less than 50 percent funded during the same time our contributions were so rapidly increasing.
So, desperate for revenue, the local government has been relying on an old tactic to get their hands on every spare penny they can.