By Tom Ferrick

The weirdest thing about the debate over the budget cuts proposed by Mayor Nutter is not what is being talked about, but what is not.

The public debate is all about closing libraries and reducing the number of fire trucks.

There is no talk - zero, zilch, nada - about what may turn out to be a disaster in the making. I am talking about the city’s pension costs.

Let me put it in context:

When it comes to libraries, the debate is over how much the city will spend to operate the system’s branches over the next five years. Total price tag: $200 million. The mayor has proposed reducing that figure by $8 million a year. Total savings: $32 million.

Now, compare and contrast:

City contributions to its pension fund over the next five years total: $2.1 billion. That’s “b” as in boy billion.

And recently, the city got some bad news. The size of its contributions are determined, in part, by how much the pension fund earns from its investments.

No surprise, those investments have tanked in recent months and the city recently announced it was going to have to make up the difference. It comes to $174 million over the next five years.

Add other additional payments the city says it now needs to make to the pension fund and the total bill comes to $283 million in additional payments over five years.

In other words, the amount of additional money the city is going to have to pay into the pension fund greatly exceeds all the money it planned to spend on public libraries.

To put it another way, when it comes to the city budget, the library system is a gnat. The pension system is an elephant.

And nobody - certainly not the Nutter administration - seems to want to talk about that elephant.

But wait, there’s more.

The situation with the pension fund could get worse - a lot worse.

I mentioned the fund’s investments. They are supposed to earn 8.34% a year - a relatively modest amount. In the 12-month period ending June 30, though, the fund lost 3% on its investments. Who has to make up the nearly 12-point difference between what the fund said it would earn and what it actually did earn? The city, with additional payments.

In July, August and September, the fund did even worse when it came to earnings. That’s why the city has to shell out the additional $174 million.

And what happens if the stock market stays in the dumps and the fund fails to earn 8.34% next year? And the year after? The city will have to make up the difference.

Today in Philadelphia, 10 cents of every dollar spent by the city goes to fund its employee pension funds. That will go up (and up and up) if the economy does not improve and improve soon.

The Nutter administration’s solution to this problem is to float a $3.5 billion bond to “even out” it’s obligations to the fund.

Think of it as a two-step: You sell a $3.5 billion bond and pay 5% interest to bondholders. You invest the money and earn 9% interest. You use the difference to subsidize the pension funds.

The city originally intended to float that bond late last spring. Thank God that plan did not get off the ground. Had the bond been sold and the $3.5 billion invested, those investments would have tanked as well.

The same thing happened to the Rendell administration. In 1999, it floated a $1 billion pension bond fund to solve its pension problems. What happened? The stock market tanked in the dot.com com bust - and the city went deeper into the hole.

But, let’s take a step back and look at this elephant in toto.

The reality is that the money the city is obligated to pay out to its retirees exceeds the amount the fund earns through its earnings and through employee and city contributions. That is true today. That will be true tomorrow, even if it floats that huge bond.

How do you deal with that problem? That is the $2 billion question and no one in the administration has proposed a solution.

Maybe they are too busy chasing gnats.

Tom Ferrick is a contributing writer for It’s Our City. He is a former columnist and reporter for The Philadelphia Inquirer.