Pension dispute at heart of Phila transit strike
Thursday, November 5th, 2009
Day three of the SEPTA strike continues without any formal bargaining. Union officials were expected to meet with Governor Ed Rendell this afternoon, as gridlock grips some city streets. The union says the key issue is an underfunded pension.
President of the Transit Worker's Union, Willie Brown, says SEPTA management is at fault for the ailing pension fund. SEPTA says its the poor economy.
SEPTA says it actually wants to increase pension payments to current retirees by 11%. But current workers would have to increase their pension contributions by 1% in year three of the contract. And that, the union complains, would offset the wage increases SEPTA is offering.
Olivia Mitchell is Director of the Pension Research Council at the Wharton School. Mitchell says SEPTA workers do have cause for concern, given that their pension is funded at only 52%. But she says many public pension funds are in the same boat.
Mitchell: The whole question of how to invest pension assets is very very critical and there may be some room for risk in that decision on the other hand, if you're only funded at 50%, its highly unlikely you're going to invest your way out of that hole, its going to take more contributions.
The stock market's woes damaged many pension funds, Mitchell says, but some fund managers compounded the problem through poor investment decisions.