ALLEGHENY COUNTY, Pa. — Allegheny County leaders are eyeing a potential sales tax increase to help pay for decades of bad investments that have left the county’s pension fund on the brink of insolvency, but they’ll need help from Harrisburg to make it happen.
In July, the county’s retirement board revealed the pension fund was $1.4 billion short, which was blamed on a series of bad private equity investments, overly optimistic returns on those investments and decisions by past board members to kick the can down the road.
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In order to overcome the shortfall, the county will need to raise $100 million per year for 20 years starting in 2028, actuaries said.
One option for obtaining the cash avoids a tax increase, but is generally thought to be unpalatable: requiring county employees to chip in 14.5% of their income toward the pension fund.
It would be an increase of an already high 11% and could drive employees to seek jobs elsewhere. It also wouldn’t be much of a band-aid, the actuaries said. They estimated it would take 150 years for the pension fund to become healthy again under that scenario.
Multiple council members confirmed that instead, leaders are looking at the sales tax to bail them out.
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The county does not have the authority to increase the sales tax to the level needed to fund pensions, meaning Harrisburg would have to get involved if leaders ultimately select that option.
It wouldn’t be the only thing asked of state lawmakers. Local officials are already calling for the state to loosen pension laws to allow the county to contribute more money without those contributions needing to be matched by employees.
Other tax increase options include a combination of hotel taxes and marijuana taxes, if Democrats take over the state government this fall.
However, the sales tax is being viewed as the simplest, most stable and least politically toxic option on the table.
There has been little public discussion of these options, and leaders did not say when residents would be brought into the conversation.
“I’m not sure of the exact timing, but we are starting to have the conversations with the stakeholders,” County Treasurer Erica Rocchi Brusselars said.
The Retirement Board’s next meeting, where they are expected to discuss the employee contribution rates, is scheduled for November.
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