May 14, 2015

Wolf: Auditor General DePasquale To Lead Task Force On Municipal Pensions

Gov. Tom Wolf Thursday announced he has named Auditor General Eugene DePasquale to head a Task Force on Municipal Pensions.
Joining Auditor General DePasquale on the task force will be Mary Soderberg, former secretary of the budget, Janet Yeomans, former vice president and treasurer of the 3M Corporation, and Susan Hockenberry, currently the executive director of the Local Government Academy.
Below is the letter Gov. Wolf sent to Auditor General DePasquale regarding the formation of the Task Force on Municipal Pensions:
Dear Auditor General DePasquale:
Although most municipal pension plans in Pennsylvania are financially healthy, a significant minority are substantially underfunded.  This underfunding can threaten both the retirement security of municipal employees and the ability of municipalities to provide basic services at a reasonable cost to their residents.  It is for this reason that I have created a Task Force on Municipal Pensions.  I am pleased that you will serve as Chair of the Task Force. The members of the Task Force are Susan Hockenberry, Mary Soderberg and Janet Yeomans.
I hope that the Task Force will make recommendations that address the unfunded accrued liability of Pennsylvania’s municipal pension plans and place those plans on a sound financial footing for the long term, while at the same time maintaining retirement security for municipal employees without imposing undue risk on them.
The following are among the specific ideas I hope the Task Force will consider.
Eliminate needless administrative expenses by consolidating municipal plans into the Pennsylvania Municipal Retirement System (PMRS) and prohibiting state assistance to municipal plans from being used for administrative expenses.
If any municipal plans are to remain outside of PMRS, professionalize investment decision-making by setting mandatory qualification standards for municipal pension fund investment managers.
Please also consider requiring municipalities with distressed pension plans to take reasonable steps to reduce costs and increase revenue dedicated to reducing unfunded pension liabilities.
To reduce costs, municipalities with distressed plans might be required to refrain from providing benefit enhancements to existing or future employees as long as their plans remain in distressed status.  Municipalities could choose from a number of options for increasing revenue dedicated to reducing unfunded liabilities.  Those options include securitizing revenue streams from municipally owned water and sewer systems and issuing pension obligation bonds if it is financially prudent to do so.
I look forward to receiving your report on solving Pennsylvania’s municipal pension funding problem in a way that is fair and sustainable for municipal employees, municipal governments, and the Commonwealth.
Auditor General Eugene DePasquale released this statement regarding his appointment--
“Pennsylvania’s underfunded municipal pension liability has now grown to nearly $8 billion, an increase of $1 billion over a two-year period, straining the budgets of many large and small municipalities across the state.  I appreciate Governor Wolf’s strong interest and commitment to finding workable solutions to this critical municipal pension challenge.
“Everyone involved understands the urgency of this issue. We want to get the job done as quickly as possible, and as thoroughly as possible. This work group’s job is not to study the problem. We will cull through the potential solutions and make recommendations to the governor and the General Assembly.
“As I said nearly two years ago when I initially raised the issue, our municipal pension challenges are not going away. We must act now to prevent this municipal pension issue from crippling state and local taxpayers, and jeopardizing the future for our communities and the retirement incomes of thousands of municipal employees. Waiting out this situation is not an option.”
The auditor general’s municipal pension report released in January found that nearly half of the employee plans statewide are in distress.