PRINTER'S NO. 1230
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
974
Session of
2015
INTRODUCED BY PETRI, COX, McGINNIS, MURT AND ZIMMERMAN,
APRIL 15, 2015
REFERRED TO COMMITTEE ON URBAN AFFAIRS, APRIL 15, 2015
AN ACT
Amending the act of December 18, 1984 (P.L.1005, No.205),
entitled, as amended, "An act mandating actuarial funding
standards for all municipal pension systems; establishing a
recovery program for municipal pension systems determined to
be financially distressed; providing for the distribution of
the tax on the premiums of foreign fire insurance companies;
and making repeals," in financially distressed municipal
pension system recovery program, providing for municipal
pension recovery plan program; in standards for municipal
pension systems, further providing for definitions and for
procurement for professional services contracts; and adding
provisions relating to financially distressed municipal
pension recovery plans and trusteeship of distressed pension
program.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The act of December 18, 1984 (P.L.1005, No.205),
known as the Municipal Pension Plan Funding Standard and
Recovery Act, is amended by adding a section to read:
Section 607.1. Municipal pension recovery plan program.
(a) General rule.--In addition to the recovery program
available under section 606, all municipalities that have a
pension plan classified as severely distressed shall develop and
carry out a pension recovery plan in accordance with chapter 12.
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(b) Expansion.--At such a time that all severely distressed
pension plans have paid down sufficient unfunded liability and
are classified as moderately distressed, chapter 12 shall apply
to all municipalities that are subject to section 605.
Section 2. The definition of "professional service contract"
in section 701-A of the act, added September 18, 2008 (P.L.396,
No.44), is amended to read:
Section 701-A. Definitions.
The following words and phrases when used in this chapter
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
* * *
"Professional services contract." A contract to which [the]
a municipal pension system having 100 or more active members is
a party and that is:
(1) for the purchase or provision of professional services,
including investment services, legal services, real estate
services and other consulting services; and
(2) not subject to a requirement that the lowest bid be
accepted.
Section 3. Section 702-A(a) of the act, added September 18,
2008 (P.L.396, No.44), is amended to read:
Section 702-A. Procurement for professional services contracts.
(a) Procedures.--Each municipal pension system having 100 or
more active members, including the Pennsylvania Municipal
Retirement System, shall develop procedures to select the most
qualified person to enter into a professional services contract.
The procedures shall ensure that the availability of a
professional services contract is advertised to potential
participants in a timely and efficient manner. Procedures shall
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include applications and disclosure forms to be used to submit a
proposal for review and to receive the award of a professional
services contract.
* * *
Section 4. The act is amended by adding a chapter to read:
CHAPTER 12
FINANCIALLY DISTRESSED MUNICIPAL PENSION RECOVERY PLANS AND
TRUSTEESHIP OF DISTRESSED PENSION PROGRAM
Section 1201. Definitions.--
The following words and phrases when used in this chapter
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Plan." A pension recovery plan is established in accordance
with this chapter.
"Program." The Financially Distressed Municipal Pension
Recovery Plans and Trusteeship of Distressed Pension Program
established by this chapter.
Section 1202. Legislative findings.
The General Assembly finds that:
(1) Municipal pension debt is an issue across this
Commonwealth and can severely cripple municipalities.
(2) It is necessary for municipalities to take firm
action in order to move their pension plans out of distressed
status and into better funding situations.
(3) Therefore, municipal pension plans that have a
severely distressed designation in accordance with Chapter 5
for two consecutive biennial actuarial rating periods should
be required to enter into the Financially Distressed
Municipal Pension Recovery Plans and Trusteeship of
Distressed Pension Program and comply with the requirements
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of this chapter.
(4) After a second consecutive severely distressed
classification the municipality should enter into an
agreement with the commission to begin making supplemental
payments of a sufficient amount to pay down the unfunded
liability with the goal of advancing to a moderately
distressed classification.
Section 1203. Pension recovery plan guidelines.
(a) Notice to municipalities.--
(1) After two consecutive severely distressed
determinations the executive director of the commission shall
notify the municipality responsible for the unfunded
liability that they are being placed in the program and that
the municipality shall submit to the commission a pension
recovery plan within six months from the date of
notification.
(2) While developing the plan and before submitting it
to the commission, the municipality shall hold two public
meetings.
(b) Requirements for plan.--In order for the plan to be
approved by the commission, plan implementation shall be
scheduled as follows:
(1) The plan shall reasonably provide for a reduction
from severe distress to moderate distress in a period of no
more than 10 years.
(2) The municipality shall pay a minimum of 1% of the
total unfunded liability each year.
(3) The municipality shall demonstrate the means by
which the municipality will make any payments required by the
plan.
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(c) Additional provisions for plan.--The plan may include:
(1) The lease or sale of assets to generate additional
revenue, provided that:
(i) the property was not acquired under the act of
January 19, 1967 (1968, P.L.992, No.442), entitled "An
act authorizing the Commonwealth of Pennsylvania and the
local government units thereof to preserve, acquire or
hold land for open space uses," or the act of December
15, 1959 (P.L.1772, No.670), entitled "An act providing
for the orderly disposition of properties situate within
political subdivisions and donated, or otherwise
dedicated or offered for dedication, where no formal
record appears as to acceptance by the political
subdivision, as public parks, squares or similar uses and
public buildings, and no longer necessary or practicable
for such purposes, and granting orphans' courts
jurisdiction with respect thereto;" and
(ii) before considering the outright sale of an
asset as part of the plan, the municipality considers
leasing the asset.
(2) Issuance of bonds in accordance with 53 Pa.C.S. Pt.
VII Subpt. B (relating to indebtedness and borrowing) for the
purpose of paying down the unfunded liability.
(3) Any other remedy provided under this act.
(d) Review of plan by commission.--After receipt of the
plan, the commission shall review the proposed plan and, within
90 days, do one of the following:
(1) If the commission recommends changes to the proposed
plan, the municipality shall have 30 days to review the
proposed changes and work with the commission to achieve a
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plan that is acceptable to the commission.
(2) (i) If the municipality fails to achieve a plan
that is acceptable to the commission within 30 days, the
plan shall be deemed approved with the inclusion of the
commission's recommended changes.
(ii) A plan is considered a failure if the
commission determines any of the following applies:
(A) The plan does not demonstrate that it can
reasonably be paid for.
(B) The plan does not move the pension into a
more stable fiscal position.
(C) The plan does not explore all reasonable
funding options.
(D) Any other deficiency found by the
commission.
(e) Time period to implement.--The municipality shall have
90 days from approval by the commission to implement the plan by
ordinance.
Section 1204. Yearly reporting.
(a) Duty to submit.--At the end of every fiscal year, a
municipality subject to this act shall submit to the commission
financial documentation proving that the municipality is
complying with the provisions of the approved plan.
(b) Commission to recommend action.--If, after reviewing the
yearly report on the plan, the commission determines that the
plan is not performing to expectations, the commission can
recommend action under section 1205.
Section 1205. Compliance.
(a) Remedies of commission.--If a municipality subject to
this act fails to comply with the provisions in section 1203 or
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1204, the commission may exercise any of the following remedies:
(1) Work with the municipality to bring the plan into
compliance.
(2) Develop possible amendments to the approved plan.
(3) Petition the Office of the Auditor General to begin
proceedings to place the pension in question into trusteeship
in accordance with section 1206.
(b) Appeal to commission.--A municipality that has been
found to be not in compliance may appeal the issue of
noncompliance to the commission.
Section 1206. Trusteeship of distressed pension.
(a) Petition to be filed by Auditor General.--
(1) Following determination of noncompliance under
section 1205 or having completed a plan under section 1203
but failing to achieve moderately distressed status, the
commission may direct the Office of the Auditor General to
file a petition in Commonwealth Court to appoint the
individual named in the petition as a receiver for the
severely distressed pension plan. The court may not appoint
any person other than the individual named in the petition as
the receiver.
(2) This section shall apply only after all other
options under section 1204 have been exhausted.
(3) The Office of the Auditor General shall determine
who shall be named on the petition
(4) The Auditor General shall serve the petition upon:
(i) the governing body of the municipality that is
responsible for the severely distressed pension; and
(ii) the administrator of the severely distressed
pension plan.
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(5) The Auditor General shall publish notice of the
filing of the petition once in a newspaper of general
circulation.
(b) Hearing.--
(1) Upon notification by the commission and the Auditor
General of the failure of the municipality to comply with any
of the provisions found in sections 1203, 1204 and 1205, the
Commonwealth Court shall conduct a hearing within 15 days of
notification of the petition.
(2) At a minimum, any person given notice under
subsection (a)(4) shall be at the hearing.
(3) Representatives from the commission and the Office
of the Auditor General may attend the hearing.
(c) Determination.--No later than 60 days following the
filing of a petition under this section, the Commonwealth Court
shall issue an order under subsection (e) if it finds by a
preponderance of the evidence that t here has been a failure by:
(1) the governing body of the municipality to implement
a plan in accordance with section 1203;
(2) the governing body of the municipality fails to
properly report compliance in accordance with section 1204;
or
(3) the governing body fails to work with the commission
in accordance with section 1205.
(d) Order.--An order issued under this subsection shall
state the findings under subsection (c) and:
(1) grant the petition and declare the severely
distressed pension plan is to be placed in trusteeship;
(2) appoint the individual named in the petition to be
the receiver for a period not to exceed the duration of the
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plan;
(3) direct the trustee to develop a plan within 90 days
in accordance with section 1203 and submit it to the Public
Employee Retirement Commission, the Auditor General, the
governing body and the administrator of the severely
distressed pension plan; or
(4) direct the trustee to bring the municipality into
compliance with a previously agreed to plan under section
1203.
(e) Effect of confirmation.--The confirmation of the plan
shall have the effect of:
(1) Imposing on the elected and appointed officials of
the municipality or an authority a mandatory duty to
undertake the acts stated in the plan.
(2) Suspending the authority of the elected and
appointed officials of the municipality or an authority to
exercise power on behalf of the municipality or authority
pursuant to law, charter, ordinance, rule or regulation to
the extent that the power would interfere with the powers
granted to the receiver or the goals of the plan.
(f) Liability.--The receiver shall not be liable personally
for any obligations of the municipality or authority. It is
declared to be the intent of the General Assembly that the
receiver shall enjoy sovereign and official immunity as provided
in 1 Pa.C.S. § 2310 (relating to sovereign immunity reaffirmed;
specific waiver) and shall remain immune from suit except as
provided by and subject to the provisions of 42 Pa.C.S. Ch. 85
Subchs. A (relating to general provisions) and B (relating to
actions against Commonwealth parties).
(g) Powers and duties.--Notwithstanding any other provision
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of law, the trustee shall have the following powers and duties:
(1) To require the municipality or authority to take
actions necessary to implement the plan under section 1203.
(2) To modify the plan as necessary to achieve financial
stability of the distressed pension plan in accordance with
section 1203. Any modification made to the plan shall be made
in consultation with the commission and the Office of the
Auditor General.
(3) To submit annual reports to the governing body,
administrators of the pension plan and the Office of the
Auditor General. The reports shall be posted on a publicly
accessible Internet website maintained by the municipality or
authority.
(4) To require the municipality or authority to cause
the sale, lease, conveyance, assignment or other use or
disposition of the municipality's or authority's assets in
accordance with section 1203.
(5) To approve, disapprove, modify, reject, terminate or
renegotiate contracts and agreements with the municipality or
authority relating to the implementation of the plan in
section 1203, except to the extent prohibited by the
Constitution of the United States and the Constitution of
Pennsylvania.
(6) To direct the municipality or authority to take any
other action to implement the plan.
(7) To attend executive sessions of the governing body
of the municipality or authority and make reports to the
public on implementation of the plan.
(8) To meet and consult with the advisory committee
under subsection 1207 (a).
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(9) To employ financial or legal experts deemed
necessary to develop and implement the plan. Notwithstanding
any law to the contrary, the employment of such experts shall
not be subject to contractual competitive bidding procedures.
(h) Authorization prohibited.--Neither this chapter nor the
plan shall be construed to authorize the receiver to do any of
the following:
(1) Unilaterally levy taxes.
(2) Unilaterally abrogate, alter or otherwise interfere
with a lien, charge, covenant or relative priority that is:
(i) Held by a holder of a debt obligation of a
municipality or authority.
(ii) Granted by the contract, law, rule or
regulation governing the debt obligation.
(3) Unilaterally impair or modify existing bonds, notes,
municipal securities or other lawful contractual or legal
obligations of the municipality or authority.
(4) Authorize the use of the proceeds of the sale,
lease, conveyance, assignment or other use or disposition of
the assets of the municipality or authority in a manner
contrary to the plan.
(i) Orders.--The receiver may issue an order to an elected
or appointed official of the distressed municipality or
authority to:
(1) Implement any provision of the recovery plan.
(2) Refrain from taking any action that would interfere
with the powers granted to the receiver or the goals of the
recovery plan.
(j) Enforcement.--An order issued under subsection (a) shall
be enforceable under subsection (k).
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(k) Action by receiver.--
(1) The receiver may petition the Commonwealth Court to
issue a writ of mandamus upon any elected or appointed
official of the municipality or authority to secure
compliance with an order issued under subsection (i).
(2) The court shall grant or deny the relief within 14
days of the filing of the petition. The court shall grant the
relief requested if it determines that the order was issued
in compliance with this chapter.
(l) Action by elected or appointed officials.--Any elected
or appointed official of a municipality or authority may
petition the Commonwealth Court to enjoin any action of the
receiver that is contrary to this chapter.
(m) Time.--Receivership under this chapter shall expire at
the completion of the plan created under section 1203 or at such
time as the pension plan is classified as moderately distressed
for two consecutive determinations.
Section 1207. Municipal Pension Recovery Advisory Committee.
(a) Establishment.--A municipal pension recovery advisory
committee is established to meet and consult with a receiver in
carrying out the duties under this chapter. The sole function of
the advisory committee shall be to provide recommendations and
feedback to the receiver on the implementation of plans.
(b) Composition.--The advisory committee established under
subsection (a) shall be comprised of the following:
(1) The chief executive officer, if any, of the
applicable municipality or a designee.
(2) The president of the governing body of the
applicable municipality or a designee.
(3) One member appointed by the Public Employee
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Retirement Commission.
Section 1208. Costs.
A municipality with a severely distressed pension shall be
responsible for the following costs:
(1) The costs to implement the provisions of this
chapter for the municipality.
(2) Cost to the commission for review of the plan.
(3) Any cost to the trustee if one is appointed.
Section 5. This act shall take effect in 60 days.
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