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April 13, 2013

Bill would remove pensions from labor talks

HARRISBURG — A York County Republican has proposed a bill that would defang the powerful public safety unions by removing pension benefits from the list of things that can be negotiated in labor contracts.

Rep. Seth Grove’s bill also would place new hires in cash-balance pension plans instead of the defined-benefit plans that remain common in public sector.

A third measure in the legislation would bar police officers and firefighters from running up overtime in the final years of their careers in order to generate higher pension benefits.

The effort comes as municipal leaders across the state deal with crippling pension costs that have been largely overshadowed by the public discussion of the state government’s much larger pension crisis.

Grove’s bill was heavily promoted by the Coalition for Sustainable Communities, an effort comprised of chambers of commerce and organizations representing local government officials.

Rick Schuettler, deputy executive director of the Pennsylvania Municipal League, one of the organizations in that coalition, said the measure would benefit those plans, which are adequately funded. The reform would alleviate some of the pressure that governments have to pay their pension bills and make the worker share some of the risk.

Grove said he would not oppose an effort to reform all the municipal pensions. But municipal officials have most loudly complained about the pensions for police and fire, Grove said.

Les Neri, president of the state lodge of the Fraternal Order of Police, pointed to a recent report by the Pennsylvania Employee Retirement Commission indicated the state could reform the pension system by consolidating the weaker pensions.

That report noted Pennsylvania has more than 3,000 pension plans because many municipalities have multiple plans for different types of employees.

The biggest pension problems are concentrated in the larger police and fire departments. Many small pensions are in healthy shape.

In Johnstown, the police pension only has 52 percent of the money it needs. The Johnstown fire department pension only has 34 percent of the money needed to pay the bills.

Between the two of them, the fire and police pensions in Johnstown are $19.5 million in the hole. The other pensions for Johnstown municipal employees are under-funded, as well, though not as severely as the public safety pensions.

In New Castle, the firefighters’ pension is $5.4 million in the hole. The police pension is $7.4 million in the hole.

Not all police pensions are struggling. Meadville’s police pension is 98 percent funded. In Lawrence County, the pension for the two-man police force in Pulaski Township has more than double the money it needs to meet its obligations.

While Grove’s bill takes pension issues out of labor negotiations, some municipalities have been able to negotiate changes to pension plans.

Thirty years ago, a group of municipal workers in Milton agreed to participate in a defined-contribution pension, said Chuck Beck, borough manager.

Milton now pays $2,704 a year for each of the 14 employees in that plan. That money goes into the retirement funds of the workers and when they retire they get to keep their savings, plus interest earnings. Milton’s two traditional public sector defined-benefit pensions are a combined $1 million in the hole.

That defined-contribution plan, by its nature, is completely funded because the borough’s responsibility is limited to those contributions.

The borough has been unable to get the other employees, including the police, to agree to a defined-contribution plan.

(Email: jfinnerty@cnhi.com)

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