Editor’s Note: Also check out Sean’s report earlier today on the Rick Smith Show. Sean is now in Harrisburg working as the Rick Smith Show capital correspondent. This was his first report. Show him some love! And, if you really want to help make his time in Harrisburg successful, please chip a few bucks for our Indiegogo campaign to support his work.
There is a growing pension crisis in Pennsylvania and it is not the statewide pension crisis that we were accustomed to hearing about over the past two years. At a Capitol press conference earlier this afternoon, Auditor General Eugene DePasquale announced that the underfunded municipal pension liability is at $7.7 billion, which is a $1 billion increase over the past two years. Inside the report, 562 of the state’s 1,233 municipal are in some sort of financial distress. 438 of the municipalities are facing minimal distress (70 to 89 percent funded liabilities), 102 are moderate distressed (50 – 69 percent funded liabilities) and 22 municipalities are in severe distress (less than 50 percent funded liabilities).
At the press conference, DePasquale noted that municipalities are in this mess because fewer people are working for state governments – let it be police, firefighters or non-uniform personnel, and that Pennsylvania is one of two states that allow municipalities to control their pensions on the local level instead of on a county level or something similar to that.
DePasquale noted that Pittsburgh has half of the city workers than they had 30 years ago and that those retirees are living longer. He then points out that Philadelphia has the largest underfunded pension liability in total dollars, but this is a statewide issue. When looking at the ratios of underfunded pensions, excluding Scranton, most of the distressed municipalities are located in rural Pennsylvania. However, two of the Commonwealth’s cities are in dire straits. If officials in the city of York did not come to an agreement, the city would have had to layoff half of their police and fire departments, and if the state does not act, Scranton will face a Detroit style in four years.
Because of this, Republican Leadership cannot wait for rural municipalities or the city of Scranton to go bankrupt and allow a federal judge to decide how much of their pensions goes to creditors. In Michigan, there was no action to prevent Detroit’s crisis and because of that a federal judge decided that pension recipients received $0.10 on the dollar. According to DePasquale, this is unacceptable. Recommendations to fix this problem include floating a bond, raising taxes, consolidating municipal pensions to the county level or consolidate individual municipal pensions under the Pennsylvania Municipal Retirement Services or the State Employees Retirement Services.