Sunday, September 20, 2009

Pension Reform Doesn't Reform Anything

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.


Anonymous said...

The Mayor has finally been told he cant have his cake and eat it too! you want to collect extra money from wage earners but you don't want to include them as an expense in your pension fund that the Law REQUIRES???

There are many in prisons that would love to be able to break the law and then say, "but it was the only option i had" finally the law has been made clear, no need to roll the dice any longer Mayor, and they forgave you on the 2.5 MILLION dollars you owed, you owe that back to resident and non resident wage earners, that is another law suit waiting to happen.

in a Standard Speaker article on August27, 2009 the Mayor was quoted as saying on HB1828
"Barletta expressed gratitude to the legislators who supported the legislation, including Sens. Dominic Pileggi, R-9); Lisa Baker, R-20; Raphael J. Musto, D-14, and John Gordner, R-27"

so is even the Mayor wrong on this Mr McGruff?

i see you havent posted my last 2 comments, i doubt you will post this.

Anonymous said...

and i am glad you posted the testimony of the PERC director, read on Page 4 Section 141 (a) second paragraph,
see where it says Act 205 doesn't address extending taxing authority over non residents, I KNOW ANOTHER ROLL OF THE DICE, until some non resident files for a refund on earned income that the City wasnt legally allowed to collect, the another court battle, more City funds that could pay for police and first responders spent defending the City's illegal action.
When do the residents of Hazleton hold this administration accountable?

Or maybe it will be a non resident of the City that makes me accountable for his actions!!!!!!!!

McGruff said...

I warned posters that I don't take jail and prison comments lightly. You are way out of line in your comments. I wanted to delete those as I did the others because you are so full of venom and mistruths that they beg correction. But I decided to let them stand and will properly answer them according to real facts.

While actions may be deemed improper by state authorities there is no criminal activity nor any criminal statute that would cover in any of this situation. If so, the Auditor General would have turned over the investigation to the Attorney General. THAT DIDNT HAPPEN SO QUIT THE CRAP.

You state non city residents are not subject to the tax. That is an incorrect statement. Non residents pay the Act 205 tax. Since the Act is silent there is no prohibition even looking at the language by McAneny. The tax assessed under the Local Tax Enabling Act is not assessed to non residents.

Even to date with this legislation no court has determined that Hazleton's practices were improper. I will agree that the Auditor General made a determination and Christal Pike-Nace affirmed their finding, note not findings. However the matter is still in court to determine if they are correct.

In Adjudication Order Docket No. 06-19 date May 27, 2009 Christal Pike-Nace boldfaces the following statement. The proceeds of this special municipal tax increase shall be used solely to defray the additional costs required to be paid pursuant to this act which are directly related to the pension plans of the municipality.

Now we are back to the language in the Third Class City Code and Act 205 you will find the following definitions which I posted before.

In looking at 53 P.S. §895.102 one will find definitions relating to pensions. A "Pension Fund" is defined as "the entity which is the repository for the assets amassed by a pension plan as reserved for present and future periodic retirement payments and benefits of active and retired members of the pension plan". A "Pension plan or system" is defined as "the various aspects of the relationship between a municipality and its employees wtih respect to retirement coverage provided by a municipality to its employees". A "Plan document" is defined as the law, ordinance, resolution, or related documents which governs the various aspects of the retirement coverage provided by a municipality to its employees, including periodic retirement payments and benefits, administration, and funding".

SB 961 was not a pension bill but a municipal tax bill that would authorize the use of 205 levies to collect and fund pension benefits.

We went around the horn to arrive at the starting place where Hazleton didn't have the money to fund retiree healthcare benefits. Thanks to reassessment from the County the City can raise the millage to cover those expenses if needed. But that would and should be unacceptable to taxpayers.

Let's see what the Mayor and Council comes up with as far as funding Hazleton now and in the future. Provided Eachus and/or Kanjorski don't get in the way it will be one of the best moves to be made so stay tuned.