Pennsylvania municipal plans to be combined under proposal

Jack Wagner, Pennsylvania auditor general, proposed the consolidation of the state's 3,200 municipal pension plans into a new retirement system for police officers, firefighters and non-uniformed employees.

The proposal, presented at a public hearing of the state's Public Employee Retirement Commission on Wednesday, follows a special report compiled by the auditor general's office based on audits of the 2,600 plans over which it has jurisdiction. The PERC studies public employee pension and retirement policy.

Mr. Wagner said “consolidation would yield higher investment return rates for municipal employees, reduce administrative expenses and help reduce the need for increased contributions from taxpayers,” according to a news release.

Of the 3,200 state municipal plans, more than 950 have voluntarily turned over administration to the $1.6 billion Pennsylvania Municipal Retirement System, Harrisburg, according to testimony by James Allen, secretary of the $1.6 billon pension fund, at the PERC public hearing.

“We do find it ironic that there are still so many who call for the consolidation of local government pension plans when the opportunity already exists for them to voluntarily consolidate via our agency,” Mr. Allen testified.

Mr. Wagner's report, “Analysis of Local Government Pension Plans,” covers the period July 1, 2009, to June 30, 2011, and states as of the latter date the 2,600 plans had a combined $10.2 billion in assets and $17.4 billion in liabilities for a funding ratio of 58.6%.

According to the report, 52 of the plans, or 2%, are “severely distressed,” with an aggregate funding ratio of 45%. A total of 234 plans are listed as “moderately distressed,” with an aggregate funding ratio of 53%, and 663 plans are identified as “minimally distressed,” with an aggregate funding ratio of 79%.

Mr. Wagner did state in his news release that “an alternative solution would be to maintain the existing system of individual pension plans but consolidate their administration into one entity such as the Pennsylvania Municipal Retirement System or the State Employees' Retirement System.”

The Public Employee Retirement Commission is currently conducting twice-monthly public hearings “to review the existing structure of both state and local public pension systems throughout the Commonwealth, to assure the continued viability of those systems, to identify potential obstacles to the sustainability of public pension and retirement plans, and to develop recommendations for reforms to deal with those issues,” according to the public invitation to the hearings.

Mr. Wagner's spokesman, Steve Halvonik, would not provide further information.