DePasquale’s department, which audits every municipal pension plan in the state, issued a special report on municipal pensions earlier this year that contains numerous recommendations aimed at averting a widespread crisis.
One of that report’s recommendations is consolidating all those pensions into one statewide pension system for municipalities.
Another recommendation is to end spiking, a tactic in which employees
work “unbelievable” amounts of overtime in their last few years of
employment, which raises their annual salary and favorably impacts their pensions.
DePasquale also said municipalities must become much more conservative in their projected rates of return when making pension fund investments. He said some still expect to get a nine percent return.
He added it would be better to expect three percent and get nine percent than to expect seven, eight or nine percent and only getting three. “It only digs the hole deeper.”
Also on the panel was Republican State Rep. Glenn Grell of Cumberland County, who is trying to consolidate municipal police pension plans into one statewide plan.
“We currently have 965 police pension plans in Pennsylvania,” said Grell. He said more than 300 of those plans have fewer than three members and about 650 of them have fewer than 11 members.
“We have all these administrative costs for every one of these plans.
Every one of them has a solicitor, financial advisors and accountants to service a pension fund that benefits three people. That is a big waste of money.”
Grell said much opposition to reform comes from professionals who make their livings off pension plans as well as from some municipalities who like having their own pension plan.
The three cities
Allentown averted its pension crisis by leasing its water and sanitary sewer systems for 50 years.
Bethlehem’s $71 million budget benefits from $9.8 million the city gets for hosting the Sands Casino, said Donchez. He said that $9.8 million is enough to pay for 25 police officers. Without that money, he said: “We would be in very bad shape.”
Donchez said about $23 million of next year’s city budget of about $72 million will go to medical benefits and pensions -- $3 million more than this year. “I probably have a $4 million gap, mostly because of pension and health care increases.”
“This is not sustainable,” said Donchez. “The options are tax increase, lay-offs, a reduction of services or a combination of all three.”
“Our city is doing extremely well,” said Panto, Easton’s mayor. “That means we manage our money well. It doesn’t mean we’re wealthy.”
But he said no matter how well Easton is doing financially, the pension problem always is in the back of his mind
“We have $35 million of bonds,” said Panto. “Twenty-five million dollars of that are pension bonds. I’d have a wealthy city if it wasn’t for pensions.”
Panto said one problem is that, while unionized municipal workers can’t strike, they can go to arbitration for decisions. In the last 15 years, he said, the decisions of those arbitrators have sided with the unions “way more” than they have sided with the cities.
If he was a legislator, said Panto, the first thing he would do is pass a law requiring all new municipal employees to be in the Pennsylvania municipal retirement system.