April 21, 2015 | 9:00 AM

Gov. Tom Wolf says he plans to weigh in on how to pay for municipal pensions

Listen to Gov. Tom Wolf talk about pensions and property taxes.

(York) — Gov. Tom Wolf said he plans to weigh in on how cities and other municipalities should pay for pension costs.

“I’ve already been working and talking about this. I think there’ll be a much more formal … proposal on my part soon,” Wolf said during an April 10 one-on-one interview at York College’s J.D. Brown Center for Entrepreneurship.

Wolf declined to say if “soon” meant before a state budget passes, which is supposed to happen by the end of June.

Some mayors and other municipal leaders, including York’s Kim Bracey, say pension costs are making it harder for municipalities to balance their budgets and driving them toward bankruptcy. They have pushed solutions backed by some Republican state lawmakers, which has put them at odds with some Democratic state lawmakers.

On April 10, Bracey and nine other Democratic mayors criticized state representatives and senators in their own party for not signing on to two pieces of legislation related to municipal pensions.

House Bill 316 would freeze pension benefits for current police officers and firefighters in most municipalities and reduce retirement benefits for new ones. Senate Bill 211 would change the binding arbitration rules for municipalities, which Bracey and other municipal leaders have said currently give an advantage to unions. Neither of those bills have any Democratic co-sponsors.

Bill Patton, House Democratic Caucus spokesman, said “any solution has to preserve an adequate retirement system for the hardworking employees of the municipalities” and has to be proven to save money.

Senate Democratic Leader Jay Costa, D-Allegheny County, said lawmakers should focus on municipal pensions in the fall, after the state budget and related issues are taken care of.

Wolf said he’s listening to different sides on the issues, including mayors and representatives for police officers and firefighters.

“The issue is complicated. It’s serious for cities. And I get that. … So I’m in the stage right now of asking questions,” Wolf said.

Wolf said his proposal to reduce school property taxes would have a huge impact on municipalities like York and give them new options for tackling pension costs.

“I’d like to make sure that as we look at this particular problem, municipal pensions, that we also take into account that the game has changed,” Wolf said during the April 10 interview, later adding, “Does that lead us to maybe look at another set — maybe a broader set — of choices when it comes to what we do about the underfunding of our municipal pension plans?”

Why Democratic mayors say state lawmakers need to act

The state’s auditor general, Democrat Eugene DePasquale of York County, has predicted that a Pennsylvania municipality will have a Detroit-like bankruptcy without a statewide fix for municipal pension costs. A January report from his office said 562 municipal pension plans, which are classified as distressed, are underfunded by $7.7 billion.

In an April 10 news release, sent out by the Pennsylvania Municipal League, Bracey and the other mayors praised DePasquale for bringing attention to the issue and the Republicans who have supported the reforms they back.

“Simply stated, we need legislative Democrats to acknowledge our problems and be willing to join in the effort to solve those problems,” they said.

The new release didn’t mention the governor.

Costa called the letter “disturbing and disappointing.”

He said Senate Democrats have supported previous legislation that changed pensions. He pointed to Act 44 of 2009 that changed municipal pension rules, Act 120 of 2010 that reduced benefits for new state and school district employees, and legislation last session that reduced retirement benefits for new Allegheny County employees. The Allegheny County legislation, among other things, reduced how much overtime pay can count toward retirement benefits.

He said the mayors’ statement was uninformed.

“They need to go back and do their homework before they spout off,” Costa said.

Bracey responded by saying she didn’t want to bicker with another elected official.

“The fact remains I almost had to lay off 35 police officers this past budget cycle,” she said.

She said cities are beyond a crisis point and they need structural changes at the state level.

“There’s legislation in front of our General Assembly right now that could help,” she said.

State Sen. Rob Teplitz, D-Dauphin County, said the mayors shouldn’t criticize Democratic lawmakers, who are in the minority in the General Assembly, for “not supporting a Republican plan … to fix a problem that has been created at the local level.”

Rick Schuettler, executive director of the Pennsylvania Municipal League, said his group considers the proposals bipartisan because of the number of Democratic mayors supporting them.

What the mayors are pushing

State Rep. Seth Grove, R-Dover Township, is one of the sponsors of House Bill 316, which would replace current pensions with cash balance ones for new police officers and firefighters.

The legislation would apply to townships and boroughs with at least three full-time public safety personnel and all cities, except Philadelphia.

Grove has described cash balance pensions as defined benefit plans that operates like 401(k) plans.

The legislation he’s backing would mean city and unions would no longer negotiate over their pensions.

Grove said even municipalities that aren’t in “a death spiral” when it comes to pension costs have to use more of the revenue they receive for pensions, instead of other services.

“We could have bankrupt pension systems coming up, which hurts the residents and it hurts the employees,” Grove said. “It’s definitely a lose-lose situation.”

Les Neri, president of the state lodge of the Fraternal Order of Police, said he had to review the details of House Bill 316, but his group opposed similar legislation that was introduced last session.

State Rep. Kevin Schreiber, D-York, said he’s concerned that Grove’s proposal would make it harder to hire and keep employees. Schreiber said it would take decades for Grove’s proposal to give cities real relief from pension payments that they have to make now.

Senate Bill 211 would change the state’s binding arbitration law, Act 111. The legislation would make certain parts of the process public. State Sen. John Eichelberger, the bill’s prime sponsor, said the bill would also force arbitrators to consider and describe the financial impact of their decisions.

Act 111 was approved in the 1960s. It prevents police and firefighters from going on strike and establishes a process for settling collective bargaining disputes.

Teplitz said not being able to strike means police and firefighters have less leverage in labor negotiations than other public and private sector unions. He said he’s reluctant to change that process, because he doesn’t want to make the process imbalanced.

Neri and the president of the Pennsylvania Professional Fire Fighters Association, Art Martynuska, testified against binding arbitration changes last legislative session.

In his written testimony, Martynuska said lawmakers should focus on revenue, getting tax-exempt properties to pay their fair share and regionalization.

Why Wolf thinks ‘the game has changed’

Wolf said municipalities have had limited options to pay for unfunded pensions. He said his budget proposal changes the options cities have, because he is proposing major school district property tax reduction.

Under Wolf’s plan, York City School District property taxes would be nearly eliminated for both homeowners and businesses. His proposal does not change city and county property taxes, but those aren’t as high as the school district portion.

“I think the focus on Act 111 came out of a time when there really weren’t a lot of choices,” he said, later adding, “The constraints are less onerous, I think, now for cities than they were just a couple weeks ago.”

Schreiber said Wolf’s plan would raise property value in the city, deconcentrate poverty and encourage investment in the region.

Bracey supports the governor’s budget plan.

“And we are very hopeful,” she said. “But we also know he has a big battle ahead of him with the General Assembly.”

Republicans have objected to Wolf’s budget plan, which would raise the personal income tax from 3.07 percent to 3.7 percent, raise the state sales tax from 6 percent to 6.6 percent, and expand what’s covered by the sales tax.

State Rep. Stan Saylor, R-Windsor Township, said the governor’s plan would send too much of the property tax reduction money to city districts. Saylor has a different property tax reduction plan, which would raise the personal income tax by the same rate as Wolf’s plan, raise the state sales tax to 7 percent, but not add to what’s covered by the sales tax.

Under Saylor’s plan, York City School District would still get a greater share of funding for property tax reduction than the Red Lion Area School District, but the difference wouldn’t be as big as under Wolf’s plan, Saylor said.

Grove said one concern he’s had with the governor’s proposal is that major property tax cuts in a city could prompt city leaders to think its OK to raise municipal property taxes.

New revenue for pensions can come from a variety of areas. In Allentown, the city got revenue for its pensions by leasing its water and sewer systems. At the state level, Wolf wants to use projected increased profits from the state liquor store system to put money into the Public School Employees’ Retirement System.

When it comes to dealing with municipalities across the state, Schuettler of the Pennsylvania Municipal League said that new revenue, no matter where it comes from, will just get eaten up without structural reform.

Contact Ed Mahon at 717-771-2089. Staff writer Mark Walters contributed to this report.

Backing the bills

Who is sponsoring House Bill 316

The bill had 18 sponsors as of Friday, including state Reps. Seth Grove, R-Dover Township; Kristin Phillips-Hill, R-York Township; and Stan Saylor, R-Windsor Township.

Who is sponsoring Senate Bill 211

The bill had seven sponsors as of Friday, including all four state senators representing York County: Republicans Scott Wagner, Mike Folmer, Richard Alloway II and Pat Vance.

Harrisburg

State Sen. Rob Teplitz, a Democrat who represents Harrisburg, called the municipal pension news release from the Democratic mayors “disgraceful” and “unprofessional.”

“I’m not one who believes in attacking others publicly, and I don’t appreciate it when I’m attacked publicly,” Teplitz said.

Teplitz said he meets and talks with Harrisburg Mayor Eric Papenfuse regularly, and Teplitz said Papenfuse never brought up the issue with him before signing onto that news release.

Papenfuse said in a statement he joined fellow Democrats to call attention to the issue. “I believe this is an issue that must be addressed soon, and I was happy to support the call for action in the legislature,” he said.

State Rep. Kevin Schreiber, D-York, said he wasn’t surprised or offended by the mayors’ statement.

In addition to York Mayor Kim Bracey and Papenfuse, the mayors for the following areas signed onto the statement: West Chester borough, Bethlehem, Lancaster, Kutztown borough, Easton, Allentown, Pittsburgh and Erie.