Municipal pension reform not on radar
State lawmakers are way too busy trying to resolve the state’s pension crisis to give much attention to the pension problems of municipalities.
In fact, after polling local lawmakers on the topic, it seems the concept is not being considered at all.
“I have heard very little about municipal pensions … virtually nothing about them,” said state Sen. E. Eugene Yaw, R-Loyalsock Township. “I’ve heard a lot on the state system. In all fairness, people may assume if something is done with the state system, there will be some legislation involving municipal systems.”
To cover retirement benefits promised to more than 800,000 state and public school employees, the cost is expected to mushroom from $40 billion this year to more than $65 billion by 2021, according to a state Employment Retirement Commission report from 2011.
“In his budget address, the governor did not mention municipal pensions,” said state Rep. Matthew E. Baker, R-Wellsboro. “The discourse on pensions seems to be concentrated on school and state pensions.”
“Many municipal pensions are financially sound and some are really a mess, too, but it’s not the same kind of widespread problem that we have with state pensions,” said state Rep. Garth Everett, R-Muncy.
“We haven’t seen any pension bills,” said state Rep. Rick Mirabito, D-Williamsport. “We had a meeting in Harrisburg about some ways to raise revenue and we’ve spoken to the League of Cities about pension issues with municipalities.”
In Williamsport, hands are tied because of contractual language, said city finance director William E. Nichols Jr.
“We’re restricted because the pensions are spelled out in contractual language and state requirements of third-class city code dictating how they need to be set up and operate,” he said. “To make changes means altering union contracts and/or changing state law. It’s not an easy road.”
“There is no question the municipalities face similar problems the state faces, and I think they probably need some tools to offer flexibility,” Yaw said.
However, such reform is being negotiated for new hires, which begins to save on future costs but does little or nothing to deal with present obligations, according to the commission report.
“Even the best fiscally managed municipalities will be forced to reduce services and raise taxes unless state policymakers take action,” said Jack Garner, executive director of the state Municipal League.
Williamsport taxpayers recently saw another tax hike, reduced numbers of police and one less worker on the city Streets and Parks Department.
Nichols said the city had an obligation to pay an additional $1.7 million in retirement and health care costs for the three pensions – fire, police and officers and employees, including elected officials.
Others in the city are hoping municipalities aren’t forgotten in state-level discussions.
“One of the issues I’ve spoken to state legislators about is as they work with colleagues on state difficulties, they also remember communities across the state are dealing with the same issues,” said Williamsport Councilman Jonathan Williamson, chairman of the city finance committee. “We’re asking them as they pass laws that they consider a state statute that gives municipalities the same flexibility to make reforms at a local level.”
Assistant city solicitor J. David Smith said a programmatic switch from defined benefits to defined contribution may be a solution.
“The ability to work a lot of overtime hours has a serious effect if pension calculation is based on the last 12 months of employment,” Smith said.
Defined benefit plans are designed to provide participants with a predefined and guaranteed benefit at a specific retirement age while the contribution plans provide benefits based on the amount contributed for each participant and the subsequent gains and losses of those assets, he explained.
Meanwhile, efforts to get the legislators’ ear have been under way for the past three years by the Coalition for Sustainable Communities, a group of more than 30 municipalities, including chambers of commerce.
“We belong to the coalition,” said Dr. Vincent J. Matteo, president and CEO of Williamsport/Lycoming Chamber of Commerce. “We’re working with the coalition to recommend legislation supported in Harrisburg and try to find a solution that is fair.”
Nearly one-third of the state’s municipal pension plans are considered distressed, and nearly every county in the state has at least one municipality with a pension plan under a high level of financial stress, according to a news release from the Coalition for Sustainable Communities.
But, thus far, municipal pension reform remains in a holding pattern across the state, said Dr. Brian Jensen, executive director of the state Economy League of Greater Pittsburgh.
“We have worked closely with the coalition and strongly believe that by reforming both the municipal binding arbitration and pension laws, which go hand in hand, we can begin to offer distressed communities a viable path forward while also preventing similar situations across the state,” Jensen said.