The roughly $4 billion fund, which sends checks to 33,902 retirees, disabled workers and beneficiaries, needs $4.9 billion more to be made whole. The city's efforts to prop it up are eating more and more cash.
In 2001, pension fund payments and debt service ate up 6.7 percent of the city's general-fund budget. By 2016, the pension is projected to eat up 16.5 percent, according to a recent report from the Pennsylvania Intergovernmental Cooperation Authority.
And the recent fluctuations in the stock market could take a further toll on the fund's investment income.
There are no easy fixes to this financial problem, which affects cities and states around the country. Here, the reasons for the crisis include underfunding by previous mayors, rosy investment earnings projections and low worker contributions compared to benefits - compounded by the 2008 stock market crash.
To make matters worse, pensions are a potent political issue. The city's powerful municipal unions have negotiated contracts over the years to get low contribution rates, and have supported efforts to create goodies like the Deferred Retirement Option Plan. The fact that City Council and the mayor couldn't team up to end the DROP program this year - even though the public hates it - shows the difficulty of tackling pensions head-on.
"I think there's a political problem that has led to this crisis and I think that politics keeps it from being addressed in any meaningful way," said Zack Stalberg, president of the watchdog Committee of Seventy.
Mayor Nutter said that he is serious about long-term pension fixes, pointing to his refusal to sign new contracts for nonuniformed workers without pension reforms, like higher worker contribution rates or a lower-cost plan for new hires.
"If you're asking me, 'Is the current system fair to residents who keep paying higher taxes to support an underfunded pension plan?,' the answer is no," Nutter said.
Who shot the pension plan?
Where's the smoking gun? There's a bunch of them.
Dating back to the 1950s, mayors promised hefty benefits to workers, but kicked the can down the road when it came to paying for them. Mayor Ed Rendell tried to shore up the fund with a bond deal in the 1990s, but the investment went south. Mayor John Street reduced the city's annual payments into the fund, which increased the city's unfunded liabilities.
After Nutter took office, the 2008 market crash wiped out 20 percent of the fund's value. Nutter won permission from state lawmakers to delay payments into the fund and to stretch out the payment schedule.
While the economy and the stock market falter, the city is counting on getting an 8.15 percent return on pension investments. Analysts said that banking on a lower return might be prudent.
"The general trend in the industry is somewhere in the 7s," said City Controller Alan Butkovitz, who has pushed to bring the rate down since he joined the Board of Pensions and Retirement. "Basically, the pension fund is in worse shape than it appears to be in the numbers because the 8.15 percent is not a realistic long term rate of return."
Finance Director Rob Dubow, chairman of the pension board, said that given the fund's long-term performance, 8.15 percent was not unrealistic.
A recent PICA report also noted that there are more retirees drawing checks than employees paying in - and that many workers are contributing a relatively low amount for their benefit levels.
The average pension is $18,148 a year. Most nonuniformed workers pay just 1.94 percent of their paychecks into the fund. A small number of workers are grandfathered in at higher dedeuctions, but receive greater benefits.
According to a recent PICA report, the 1.94 percent contribution rate from blue- and white-collar workers is well below "a national average of over 5 percent, and Commonwealth of Pennsylvania employees who contribute 6.5 percent."
Most uniformed workers (police and fire) contribute 5 percent toward their pension.
Union leaders defend their contribution levels as a product of their contract negotiations. The problem, they say, lies with the city for not keeping its contribution promises.
"I think the problem has been that the city was not doing what they are supposed to do," said Pete Matthews, president of AFSCME District Council 33, which represents blue-collar workers.
Dubow said that the city is making the proper contributions.
Benefits are "not outrageous, we just can't afford them," Dubow said. "We have to go to a system we can afford so we can ensure we'll be able to make the payments."
The city of Atlanta just did something radical with their city-worker pension plan. They changed it. Active employees will have to pay in more. Future hires will get a less generous plan.
But unlike Atlanta, any changes in Philly would have to be negotiated with the unions. And Nutter's success in that arena has been mixed.
In binding arbitration deals reached with police and fire, Nutter won a lower-cost pension tier for new hires, but so far all new workers have chosen to pay extra to stay in the traditional plan. He did not get any change in contribution rates from current workers.
Nutter hasn't reached deals with nonuniformed workers, whose contracts expired more than two years ago. Those employees can keep their old contract terms if they don't strike, making it hard for Nutter to force pension concessions, unless he threatens layoffs, which he hasn't.
"What I can do is be very firm and very clear in our position in terms of negotiations," Nutter said. "Defined benefit plans are not sustainable."
Union leaders haven't flinched.
"We've given up a lot of stuff so we can get money," said Bill Gault, president of the firefighters union.
The unions are bolstered by knowledge that state law has traditionally been interpreted by the courts as very protective of public pensions.
"We're in that group that is the most protective rulings," said James McAneny, executive director of the Pennsylvania Employees Retirement Commission.
The unions flexed their muscles earlier this year when Nutter tried to end the DROP program, which provides a lump-sum payment to workers who commit to a fixed retirement date.
Studies show that the program has cost the city at least $100 million since 1999. But City Council - a body that includes several DROP enrollees - chose to amend, rather than end the program. Nutter then vetoed their plan, but Council unanimously overrode that veto, meaning that DROP is alive and kicking.
Stalberg said that Nutter, expected to be re-elected to his second term in November, should have tried to tackle pensions sooner.
"I think he should have started it four years ago when he was a certain candidate to win," Stalberg said. "He didn't really do it then, and he's done it in a limited way since then, and it becomes increasingly hard for a lame duck to do anything about."
Nutter said that he has won savings by not paying out raises to nonuniformed workers. He also insisted that he would have clout with the unions in his second term.
"Our strategy and our pattern has been very clear," Nutter said. "I am willing to fight those fights."
Are there other ways Philadelphia could shore up the fund?
Many options would hurt the city's short-term bottom line. It might be prudent for the city to lower the interest-rate projections or to increase payments into the fund, but that would leave less money for services, already being squeezed.
"You have a system that's underfunded that also is eating up more and more of our budget," said Dubow.
Some say that the city should sell a building or a utility to raise cash. PICA Board Chairman Sam Katz has raised this idea, as has Green.
The idea of selling a utility like the gas works or the airport has been raised before and would face legal and logistical hurdles. Dubow said he didn't know if it could happen.
"If there were a reasonable way to have an infusion of cash into the system that didn't create another set of burdens for us, and we could couple it with the long-term returns we're looking for, that would make sense, but I don't know what that is," Dubow said.
PICA Executive Director Uri Monson stressed that a short-term fix like selling a utility was a good idea only if the city also dealt with the underlying problems facing the fund.
"If you're going to really deal with the pension problem and you're going to consider other ways to fund the unfunded liability, it doesn't make sense to do it until you have a leak-proof ship," Monson said.
Right now, the ship is sinking. For the worst-case-scenario, look at the city of Central Falls, R.I., which filed for bankruptcy last month and is seeking to cut pensions for retirees. No one says that Philly is headed that way, but pensioners and residents of Central Falls probably didn't see it coming, either.