Allentown Mayor Ed Pawlowski is among a growing coalition of business, municipal and other community leaders from across the state returning to the state Capitol in Harrisburg today to advance municipal pension reforms. The proposals are designed to give communities the tools they need to both rein in the spiraling costs of municipal pensions and maintain public safety by protecting jobs for uniformed police and fire. These officials, all members of the Coalition for Sustainable Communities (CSC), have voiced concern over the past year that state-level pension reform discussions in Harrisburg were ignoring the same problem at the local level. But now, the CSC is leading the charge for municipal pension reform.
Approximately one third of Pennsylvanians live in a municipality with a distressed pension plan. Allentown’s unfunded pension liability reached approximately $150 million last year before the city acted on a 50 year concession lease of its water and sewer utility system.
“Nearly a year ago, I introduced HB 1581 to offer municipalities across the state a viable and affordable way to control their pension costs,” said Rep. Seth Grove (R-York County). “My reform proposal is designed to create healthier municipal pension plans and safeguard public safety employee job opportunities, while ensuring the financial sustainability of our core communities. Thanks to the bi-partisan efforts of our municipal and business leaders, we are finally in a position to get this done before passage of the 2014-15 Budget.”
Pawlowski praised Grove for bringing together a broad grouping of stakeholders from across the state. “I thank Rep. Grove for his effort to bring together a broad coalition of supporters and for showing that Republicans and Democrats can come together on important public policy that improves the lives of residents across the Commonwealth,” said Pawlowski. “Allentown thought outside the box to tackle its pension problem. Municipalities from east to west need the state legislature to comprehensively address the issue.”
Highlights of the Grove reforms include:
• All current employees are held harmless and retain existing rights and benefits at current levels;
• For new hires only, shifts to a cash balance “hybrid” plan – a balanced and financially sustainable approach that includes aspects of both a defined benefit and defined contribution plan. A hybrid plan, as designed here, also allows existing pension liabilities to be paid down over time and without the need for new revenue;
• Authorizes an optional 457 plan as an additional employee retirement tool;
• Require pensions to be calculated on base pay and a small percentage of overtime. This will curb the practice of “spiking” or increasing final average salary with excessive overtime and unused sick/vacation days;
• Removes pension benefits from the collective bargaining process;
• Establishes pension plan portability options for new hires; and
• Improves job and pension security for uniformed unions.
HB 1581 is currently assigned to the House Local Government Committee and was the subject of a hearing on January 15 of this year.