Pa.'s municipal pension crisis needs more attention, action
Pennsylvania Auditor General Eugene DePasquale has spent more than a year sounding alarm bells over the state of municipal pension plans in this state — and it’s past time someone listened to him.
Pennsylvania has a gigantic and diverse network of government entities that act at the local level. There are 1,223 of these bodies at work managing a cumulative 2,600 municipal pension plans — more than the rest of the country combined. The vast majority of those plans cover nonuniformed employees.
Many, if not most, of the elected officials who run these entities volunteer their time and expertise for free. Their employees — the police officers and firefighters who keep people safe; the administrators who manage day-to-day operations; the laborers and staffers who do the public’s work and help them interact with their local government — do not.
They shouldn’t have to. Nor should they have to go home from work every day wondering if the public’s promises to them will be kept after they leave the office, precinct or station for the final time and move into retirement. Unfortunately, that’s exactly what is happening in many municipalities — 562 to be precise — across this state, and the problem has been growing at a precipitous rate.
A collective, unfunded liability that was about $6.7 billion in 2011 grew to $7.7 billion in 2013, and DePasquale said last week that those figures are a conservative estimate. He pegged the real cumulative liability at somewhere between $8 billion and $10 billion. That’s a staggering figure when you consider that more than half of these municipal pension plans have 10 or fewer members. And it becomes truly frightening when you realize that it is mostly those small plans — those with assets and liabilities in the tens of thousands or hundreds of thousands of dollars — that are in imminent danger of collapsing.
Pennsylvania’s historic budget impasse has potentially made the matter even worse, DePasquale said. Funding for the Public Employee Retirement Commission was among the items zeroed out by Gov. Tom Wolf in his line-item vetoes to a partial budget enacted in December.
The agency is obscure but vital when it comes to municipal pensions: PERC is responsible for calculating the state’s contribution to these plans — which can be sizable — and cutting the checks, which are due in October. Without funding, another state agency has to be legally vested to do PERC’s work; DePasquale has volunteered his office for the duties.
This is a “just get it done” situation for both state and municipal government. State officials cannot allow the political gridlock crippling Harrisburg to deal a death blow to already struggling municipal pension plans.
Municipal officials, who routinely project unrealistic yearly rates of return for these plans, must end the irresponsible behavior that continues to put these plans on a path to insolvency.
At this point, there does not appear to be a plan that does not include painful decisions — whether higher taxes or concessions on benefits — for everyone. But the time to confront those decisions is now.
It would be a shame to see one of Pennsylvania’s greatest strengths — the systems that allow residents a voice in their communities — turn into one of its greatest failures.
