Could Auditor General’s Pension Recommendations Gain Steam?

Could Auditor General’s Pension Recommendations Gain Steam?

piggy bank

Pennsylvania’s local governments separately administer their own pension plans (unless they have voluntarily transferred them to the PA Municipal Retirement System) and, since plans are separated so that uniformed employees don’t mix with non-uniformed employees, the state’s more than 3,000 local plans represent about ¼ of all the local plans across the country.  In Allegheny County alone there are close to 300 plans.

Most of these pension plans assume that the investments of the plan will earn a return of 7 or 8 percent, which allows them to keep the amount of money they must put into the plan as employer contributions quite low.  Locally, the City of Pittsburgh has seen this debate play out over the last two years: in 2012 it was recommended that the City’s 8 percent be lowered—which would require a debate over priorities of what to fund in the way of services—and when the rate was actually lowered to 7.5 percent with support from the outgoing Mayor (who opposed it before).

The Auditor General weighed in on both of these topics recently, noting “…consolidating administrative functions of the state’s hundreds of municipal pension systems would be a way to eek out some savings” and “…too many municipalities get through their budget by having a wildly optimistic rate of return on their pension that in the last several years they simply are not able to meet.”  As the official responsible for auditing municipal pensions and overseeing the state aid that funds them, his opinion might carry some weight.