RRISBURG — Guaranteed pensions for most of Pennsylvania’s local police officers and paid firefighters would not be offered to future hires under a bill that passed a key House committee Tuesday.
The only municipality not affected by the bill is the state’s largest, Philadelphia.
The bill passed the Republican-controlled House State Government committee on a party-line vote. It was hailed by Democratic Mayors Rick Gray of Lancaster and Kim Bracey of York as a way to help ease budget constraints and improve public safety. The mayors also chastised Democratic lawmakers for not supporting the bill.
Democratic lawmakers do not understand that cities can no longer afford to pay guaranteed pensions, Gray said. Rising pension costs mean cities cannot afford to fill police and fire vacancies and potholes go unfixed, he said.
Cities are looking for legislative help that will allow them to curb local pension costs, said Rep. Keith Greiner, R-Lancaster, the bill’s primary sponsor.
“The municipal leaders you see here today are not looking for handouts,” he said. “They are looking for hand-ups.”
A similar bill is in the Senate.
The bill is opposed by the Pennsylvania State Lodge of the Fraternal Order of Police, which represents 40,000 local police officers. The FOP’s opposition could stymie the bill’s passage. Law enforcement unions hold considerable clout over Democratic and Republican lawmakers.
State FOP President Les Neri could not be reached. However, he has previously said the right to a secure retirement is important for police and firefighters because of their dangerous jobs, because they do not contribute to Social Security, and because they often have to retire in their mid-50s, several years before federal Medicare starts at 65.
The House bill would not affect current or retired municipal police and fire employees. Those existing pensions, however, would be frozen at current rates and could not be changed by a mediator through the contract arbitration process run by independent mediators.
Police and firefighters hired as of Jan. 1, 2016, would receive a cash-balance retirement plan, which hypothetically offers more secure benefits than a corporate-like 401(k) retirement plan and less security than guaranteed pensions. A 401(k) plan offers no assurances, since it rides the stock and bond markets.
Overtime pay also would not be considered as part of the salary package in factoring pension benefits upon an increased retirement threshold of 55 years of age and 25 years of service. Retirees also would not receive post-employment health care.
The cash-balance plan would be made up of three pieces: employer contribution, employee contribution, and an expected interest rate of return based on all employees’ money put into the same pot.
The employer’s contribution toward workers’ retirement would be 4.5 percent of salary. The employee would contribute 6 percent of salary if he also pays into the federal Social Security retirement plan, or 9 percent of salary if he does not pay into Social Security.
The employer would guarantee up to a 4.5 percent rate of return on the large pot of employees’ money. If the large pot does not hit that target, the employer is on the hook for the difference. If the large pot exceeds the target, extra money goes to paying off the existing debt.
Of 1,036 police and fire municipal pensions in Pennsylvania, 616 are in the red, accounting for 53 percent of the total $7.8 billion pension debt held by cities, townships and boroughs, according to the most recent data held by the Pennsylvania Employee Retirement Commission. The rest of the municipal debt is held by 823 of 2,124 non-uniform unions.
steve.esack@mcall.com
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