The issue of pension funding in Hazleton and cities around the state was addressed in legislation recently passed. However, there is good news and bad news.
First, let's straighten out a political slant to an article that appeared in Saturday's Hazleton Standard Speaker. Here are some quotes that need clarification.
The law signed Friday by Gov. Ed Rendell says that cities "may no longer" use pension tax revenues for any purpose other than to defray pension costs.
By using that language, the law recognizes retroactively that Hazleton had diverted pension tax revenues to other purposes for a number of years, but that practice will no longer be legal in the future, said House Majority Leader Todd Eachus, D-116, Hazleton, on Friday
With the new law taking effect immediately, Wagner can legally release the city from having to make the repayment, said Eachus.
Eachus said he plans to contact Wagner about the matter now that the law is on the books.
Attorneys in the auditor general's office were briefed on the pension bill's provisions as it moved through the House and Senate in recent weeks.
"My hope is Mr. Wagner will consider the relief to taxpayers immediately," added Eachus.
The law makes new use of "asset smoothing" which involves spreading out pension fund gains and losses over a time. This is designed to avoid wide fluctuation in annual employer contribution requirements stemming from volatile investment markets.
This will save Hazleton more than $600,000 annually on its pension obligation.
Those portions are some of the most disingenous statements on record. Mr. Eachus had nothing to do with the language highlighted that helped Hazleton. That language was added on the Senate side, not the House. He sat silent during a House Fianance Committee hearing held August 18,2008 when the merits of Senate Bill 961 were discussed.
Now lets move onto the real reason for this post and part of it will address the supposed "savings" for the City of Hazleton.
Over at the Commonwealth Foundation Nathan Benefield provides a great analysis of HB 1828 that was passed and is the subject of the article discussed above. Essentially this bill allows municiplaties with under funded pensions to delay payments which will mean that future taxpayers will have to foot the bill. It will lead to increased taxes.
The savings Eachus talks about with Hazleton has to do with a provision that payments are deferred for 5 years. How is that a "savings"?
What he doesn't say is that there is an 8.25% interest penalty on that deferrment. If cities like Hazleton cannot afford their pensions now how is deferring going to help them in the future? It further points to higher taxes. But it doesn't stop there.
Of course, municipalities present only part of Pennsylvania's pension woes. In 2012, state and school property taxpayers will experience significant increases in pension contributions -- from less than 5 percent of salary to upward of 30 percent -- because of similar politically motivated manipulations for public school teachers and state workers in 2001 and 2003.
This bill is no longer a missed opportunity for pension reform, but only serves to exacerbate the crisis facing Pennsylvania cities. Not only is it a vote to raise taxes now, but the deferment of payments pushes costs onto future taxpayers, and will likely mean more tax increases in the future.