Pennsylvania’s Municipal Pension Problems Are Isolated, Not Epidemic, Says Township Representative


David Sanko, executive director of the Pennsylvania State Association of Township Supervisors, penned an piece in TribLive on Friday claiming that Pennsylvania has a pension crisis – but it’s at the state level, not the municipal level.

Sanko contends that, aside from a handful of horror stories, most of the state’s municipalities aren’t buried in pension liabilities.

Sanko writes:

A handful of local governments — primarily large and midsize cities like Philadelphia, Pittsburgh and Scranton — have retirement programs that are underwater and have been for quite some time.

But the majority of municipal pension plans are doing just fine and provide a stark contrast to the horror stories. In places like Bethel Township in Berks County, Castanea Township in Clinton County, Connellsville Township in Fayette County, and Great Bend Township in Susquehanna County, employee pension plans are overfunded by as much as 700 percent.

These communities are the rule, not the exception, according to recent data from the Pennsylvania Employee Retirement Commission, which has been documenting the distress level of the 1,448 municipalities that receive state aid to offset mandated retirement benefits.

Despite the small number of severely distressed municipal plans, some are portraying the problems of a few as a statewide epidemic and want everyone, including communities that have kept their pension plans healthy and above water, to swallow the same bad medicine.

They’d like to consolidate all local retirement plans into a single statewide system and let the healthy ones’ assets be used to balance the troubled ones. But bigger isn’t better. All we have to do is look at the state’s behemoth and woefully underfunded system, which accounts for 90 percent of the pension stress in the state, for proof of that.

A report from Pennsylvania’s top auditor released last week found that the majority of the state’s municipal pension funds were not “in distress”.

However, 562 plans were classified as “distressed”.


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Scranton Levies Commuter Tax, Considers Selling Sewer System to Cover Pension Debt

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The Pennsylvania city of Scranton is scrambling to avoid bankruptcy brought on by its mounting pension costs, and in the process is turning to some less-than-conventional sources of revenue.

The city has already levied a commuter tax on non-residents who drive into Scranton for work. Now, the city is considering selling its sewer authority. From Bloomberg:

The former manufacturing community will tax commuters starting next month and may sell its sewer system to buttress its retirement funds. The city has 23 cents for every dollar in retiree obligations, down from 47 cents in 2009, according to state data. Without a fix, Scranton may go bankrupt in less than five years, said Pennsylvania Auditor General Eugene DePasquale.


Scranton’s pension costs are rising. The city’s contribution next year will reach $15.8 million, from $3.4 million in 2008, data from the city and the auditor general show. Pension expenses will take up 16 percent of the budget in 2018, from 9 percent in 2006, according to a July presentation by Hackensack, New Jersey-based financial consultant HJA Strategies LLC.

The seat of Lackawanna County, Scranton passed a 0.75 percent income tax on nonresident commuters effective Oct. 1. The measure would generate at least $5 million annually, based on county data on tax collections, and the funds would go toward pensions, [city business administrator David] Bulzoni said.


Another option is to sell the sewer authority, which has started a review of the proposal, Bulzoni said. In addition, municipal officials this month met with union representatives to discuss contract features that are depleting pension assets, Bulzoni said. He declined to elaborate because he said some solutions will involve bargaining.

The city’s pension funds were collectively 23 percent funded in 2013.