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Gridlocked: municipal pension analysis won't happen without state budget

Written by Emily Previti, epreviti | Nov 24, 2015 2:05 PM
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Photo by Lindsay Lazarski, WHYY

(Harrisburg) - Pennsylvania lawmakers have asked for a closer look at how a pension bill would affect future local police and firefighters during retirement.

They might want that, given predictions benefits could shrink to less than half of what they'd be under current rules. State law also requires the legislature to get actuarial studies from the Public Employee Retirement Commission before second consideration of a bill that would change public worker pensions.

But that can't happen, at least not right now. PERC doesn't have internal actuaries. And without a state budget, the commission can't hire a contractor as it might otherwise, says its Executive Director James McAneny.

"We're not allowed, legally, to spend money we don't have," McAneny says. "I'm still $35,000 in the hole from last year, and ... owe an actuary money for work that was already done."

House Bill 414 focused on hiring financial professionals to manage the funds and advise local officials. It was heavily amended last week to reflect provisions of other pension bills - Senate Bill 775 and House Bill 316 - that that haven't moved in months.

Actuarial analyses already were done for those pieces of legislation. That's how we know there's potential for police and fire benefits to be dramatically reduced by the defined contribution structure - one of two proposed for moderately distressed municipal pension plans .

But 414's a separate, "entirely different" bill - so it needs its own actuarial analysis. And any third-party analysis would have to be examined by an actuary commissioned by PERC, McAneny says.

State law says the legislature must has to wait 20 days for a fiscal note, but after that can then proceed without one, according to McAneny.

"I certainly hope we have a budget by then," he says.

Although supporters are pushing for it, McAneny says municipal pensions aren't expected to change as part of the budget deal (echoing comments from Gov. Tom Wolf's spokesman last week).

The proposal would require moderately distressed pensions to choose one of the new structures for new police and firefighters: defined contribution (comparable to a 401k) and cash balance (a defined benefit type subject to more stringent investment return assumptions, with excess earnings diverted to pre-existing underfunded plans).

Both types would reduce benefits to retirees from the half of base they typically get: cash balance plans, to 42 percent; defined benefit to as little as 20 percent.

Other elements of those bills included in the 54-page amendment to HB414 include reducing retirement benefits universally, to an extent, by requiring pensions to be calculated using five-year average base salaries augmented by no more than 10 percent with paid overtime, and not at all by payouts for unused sick, vacation and other time off.

Four lawmakers on the Senate Finance Committee voted against the amended bill, citing concerns about the steep cuts to retirement income.

State Sen. John Blake, D-Lackawanna, was one. He said last week he'll file amendments, but not when. His office didn't provide timeline when asked Monday.

The bill's now with the Appropriations Committee.

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