City Finance Director Rob Dubow describes the escalating pension costs as "perhaps the biggest financial challenge we face."
They also could lead to a fight between the Nutter administration and municipal unions over reducing pension benefits for future employees.
A new five-year contract with the city's police officers, awarded by arbitrators in December, allows the city to set up a new pension program for new police hires. It will require them to contribute more toward their own retirements and allow them to enroll in a hybrid program with a 401(k) component.
Another arbitration panel is considering a new contract for firefighters. But no progress has been made on pensions or other issues between the Nutter administration and the two unions representing nonuniformed workers, whose contracts expired last summer.
Because of the 2008 stock-market crash, the market value of the pension fund's assets declined more than $1 billion from mid-2008 to mid-2009.
But the overall problem goes back to the 1950s, when the city increased pension benefits with little attention to their ultimate costs, and unfunded liabilities merited only a footnote in the pension system's annual reports.
Since then, it has grown into one of the city's biggest financial sinkholes, as one mayor after another has left a bigger pension hole for his successor, kicking the problem down the road to future taxpayers.
Politicians who run for office every two or four years are usually inclined to ignore issues like climate change and pension reform, where it may take decades to see the consequences.
