A group of mayors led by Lancaster Mayor Rick Gray encouraged Pennsylvania House lawmakers this week to adopt House Bill 316, which addresses the $7.7 billion pension crisis faced by municipal pension systems.
Rising pension costs are viewed as one of the greatest challenges facing local governments, as they often struggle to balance pension payments with the need to pay for essential services.
House Bill 316, sponsored by state Rep. Keith Greiner and Rep. Seth Grove, would apply to all townships and boroughs with full-time public-safety personnel and all cities, except Philadelphia. After a specified date, new hires would be placed in a defined-benefit plan with a balance made up of mandatory employer and employee contributions and an employer-guaranteed interest credit.
Current employees would maintain all existing rights and benefits, but these benefits would be frozen at current levels. Each municipality would maintain two plans until there are no more beneficiaries in the old defined-benefit plan.
During this week’s House State Government Committee hearing, Gray said every county in the commonwealth is suffering from the pension crisis. Many municipalities are doing everything they can to cut costs, including staff reductions, Gray said.
“Our current (pension) system isn’t sustainable; it encourages us to carry debt,” Gray told the Pennsylvania Business Daily. “Tax increases, reduced services and other one-time fixes will solve budget deficits, but a long-term solution eludes us.”
Gray said neither he, nor any other mayor in attendance, wants to eliminate benefits, but rather to implement a system that is fair and affordable.
York Mayor Kim Bracey told the commission that pension funding eats 70 percent of her city’s revenues.
“In 2015, we laid off 35 nonpolice personnel,” Bracey said.
The House bill makes sense because it only applies to new hires, Bracey said.
David Patti, president of the Pennsylvania Business Council, told the committee that pension reform is a “big ticket” item.
“Our goal is to help the public understand the need for solutions dealing with public pension issues," he said.
Gray said if something isn’t done soon, many municipalities could face bankruptcy; and once a municipality is in bankruptcy court, it is up to a judge and the judicial system to decide whether owed pensions are paid to retirees.