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Philadelphia Pension Problems Pertinent to Primary

The pension system of Philadelphia, the 5th largest U.S. city, is an issue in the city’s Democratic mayoral primary, which will be held in May. This is in even sharper focus since two of the candidates are the incumbent, Michael Nutter, and former City Councilman James Kenney, who sponsored legislation in 2007 that requires bonus checks to be sent to city employees who have retired — no matter how underfunded the system is.

And it is underfunded. According to The Philadelphia Inquirer, the city’s pension system is less than 48% funded and has obligations of $10 billion.

A law the city enacted in 1999 created the Pension Adjustment Fund to provide bonuses to city retirees when the pension fund exceeded investment goals by at least 1% over a five-year period. City law had required that the system be at least 76.7% solvent before it sent such bonuses, but Kenney sponsored a measure that eliminated the limit.

Accordingly, beginning in April, the system will start sending out bonus checks, to the tune of $62 million.

Nutter says the law as amended is fiscally irresponsible; Kenney acknowledges the city’s funding problems but argues that senior citizens should not pay the price for that.