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Senate of Pennsylvania
Session of 2015 - 2016 Regular Session


Posted: April 14, 2015 01:42 PM
From: Senator John H. Eichelberger, Jr.
To: All Senate members
Subject: Municipal Public Safety Pension Reform
In the near future, I plan to introduce municipal public safety pension reform legislation which would provide for a Defined Contribution pension plan for all newly hired municipal fire and police employees.

Earlier this year, Auditor General Eugene DePasquale reported that municipal pension liabilities are now at $7.7 billion, an increase of over $1 billion since the 2013-14 legislative session. Municipal pension distress is widespread, hitting urban, suburban, and rural areas alike with the chief cost-driver being uniformed union pensions. In fact, in 66 of Pennsylvania’s 67 counties, at least one municipality has a pension plan that is under a high level of fiscal distress. To allow this broken and high-cost municipal pension system to continue in its current state is a disservice to our public safety employees and taxpayers alike.

In full service municipalities, the overall cost of public safety is, in many cases, consuming between 50 percent to 70 percent of the respective operating budgets. This creates a constant upward pressure on both local and regional taxes (ie; commuter taxes) and threatens basic services such as public works, public safety, snow removal, and road maintenance. This ever-growing fiscal strain is not only a threat to basic municipal services, but to the pension funds themselves. In distressed communities across the Commonwealth and the country, pensions for current and retired police and fire employees are now in jeopardy. Pennsylvania has the ability to turn the tide and protect these well-deserved pensions, as well as current and future jobs, with a fair and sustainable plan. Municipal, community and business leaders from across the state have collectively called for structural reforms to municipal public safety pensions, including support for Defined Contribution plans.

This legislation takes the corrective action needed by offering full service municipal governments the tools needed to prevent widespread pension collapse and reverse the current deterioration in public safety services. This proposal will bring reality and fairness to municipal pension practices.

Highlights include:
  • All current municipal uniformed union pensions remain at existing benefit levels;
  • All new public safety employees in full service municipalities will receive a Defined Contribution pension plan, along the lines of what most Americans currently receive and one which is more fiscally sustainable;
  • All pensions, for current and future employees, are removed from the collective bargaining process so that municipal employers can control costs based on sound actuarial data while slowly paying down their existing pension liability;
  • The unaffordable and unfair practice of salary “spiking” (which occurs when final base pay calculations include overtime hours and unused sick/vacation days) is ended. Under a Defined Contribution plan each employee simply pays a percent of his or her earnings;
  • Authorizes an optional 457 investment plan as an additional employee retirement tool;
  • New public safety employees will have full portability of a Defined Contribution pension plan to any other full-service municipality; and
  • Improves job and pension security for current and future municipal uniformed union employees.

Introduced as SB755