Summary
Philadelphia’s pension costs remain a significant fiscal challenge, with the City contributing nearly $833 million in FY24—four times the normal cost of benefits earned by employees in that year. This elevated contribution level is necessary to address decades of underfunding and investment losses, including the impact of the 1999 pension obligation bonds. While the City has historically struggled with pension liabilities, recent policy changes, such as the adoption of Plan 16 (a hybrid pension plan) and adherence to the Revenue Recognition Policy (RRP), have improved the fund’s financial outlook. By maintaining these contributions, the City projects that the fund will reach 80% funded by FY29 and 100% funded by FY33. The report also outlines how pension liabilities have historically grown due to investment losses and imbalanced contributions, requiring the City to dedicate a significant portion of its budget to address the shortfall. In FY24, pension costs accounted for 13% of all General Fund expenditures, a burden that is expected to decrease as the fund stabilizes. By staying on course with planned contributions and paying down pension-related debt, the City is on track to significantly reduce its fixed costs, freeing up hundreds of millions of dollars for other priorities in the coming decade. Continued adherence to financial discipline will be crucial to achieving long-term pension sustainability.