An economic tsunami is rumbling toward Pennsylvania. Unless it can be averted, it will do great harm to communities all across the state.
Many people will face massive tax increases. Others will have fewer police officers and firefighters to protect them.
Some may have to live with both higher taxes and cutbacks in those essential services.
And municipalities forced into bankruptcy will experience financial downturns that ripple out into surrounding communities, eventually harming the entire state.
The coming tsunami is being generated by skyrocketing municipal pension costs being faced by communities all over Pennsylvania.
Whether it can be stopped was the subject of a Municipal Pension Reform Summit presented by the Greater Lehigh Valley Chamber of Commerce Wednesday afternoon.
If the crisis is not averted soon, “our cities are going to go into bankruptcy --that is going to happen,” predicted Pennsylvania Auditor General Eugene DePasquale, one of several speakers on the program’s panel.
“The end of the rainbow is not a pot of gold. It is bankruptcy. And it is coming to a municipality near you. The longer we wait, the worse this gets.”
“It’s going to collapse cities across the commonwealth if we don’t address this problem,” agreed Allentown Mayor Ed Pawlowski. “If not addressed soon, you will see city after city after city fall like dominoes into bankruptcy.
“That means entire regional economies that support these cities will start collapsing in on themselves, which will have negative economic ripple effects across the entire commonwealth.”
“It’s critical that we address this issue and we address it soon,” said Pawlowski. “If we don’t, we’re going to have this economic tsunami that will hit the entire state. Our economic engines that have been built around these core cities will start collapsing.
“The entire economy of the state is on the line here if we don’t figure out how to address this. What happens to the economy of Pennsylvania if 20 municipalities in the state go bankrupt? It would have dramatic effects on every single one of us.”
“When you have to lay off police officers or firefighters or cut back services, it’s a quality of life issue,” confirmed Bethlehem Mayor Bob Donchez.
“It will hurt the cities and it will hurt the suburbs – it will hurt the Lehigh Valley -- because there’s a ripple effect.”
“It is a $6.7 billion problem,” said DePasquale, who has determined 575 of Pennsylvania’s 1,218 municipalities have under-funded and distressed pension plans.
“Almost half the land area of Pennsylvania is covered by the problem,” he said. “It doesn’t get nearly the attention it deserves.”
“This is an issue that does not resonate with the public because it is too complicated,” said Donchez.
“This is a very complicated issue, even accountants can’t figure it out,” agreed Jeff Berdahl, chairman of the chamber’s tax & regulatory committee.
The auditor general said Pennsylvania has more municipal pension funds than the rest of the country combined.
DePasquale said so many municipalities are doing their own pensions that many of their staffs are “outgunned. They don’t have the expertise to make some of these financial decisions.”
He said Pennsylvania communities face rising pension costs not only for police and fire departments, but other employees as well. “That happens in city after city, township after township, all over Pennsylvania.”
About 75 people attended the chamber’s hour-long program in Lehigh Country Club in Lower Macungie Township.
Before DePasquale and the other panelists spoke, the stage was set by Barry Fisher, who is chairman of the chamber’s public policy committee and general manager of Channel 69 News.
“It’s not just a big city issue,” said Fisher. “Nearly half of all Pennsylvanians live in a financially distressed community. That’s substantial.”