Scranton Mayor William Courtright on Thursday called for the transfer of the city's teetering pension fund to the Pennsylvania Municipal Retirement System, an independent state agency that administers public employee pension plans.
His move came one day after state Auditor General Eugene DePasquale said city officials disregarded pension laws in paying double benefits to 35 employees over the last 12 years at a cost of $2.9 million. DePasquale said the payouts at least partially contributed to the city's non-uniformed pension plan's funding level dwindling from 78% to 23.
Should Scranton not act, the city could go bankrupt possibly within two years, DePasquale said.
Courtright, a former city tax collector and longtime local businessman who took office in January 2014 after 12-year mayor Chris Doherty did not seek re-election, is asking the support of DePasquale, Gov. Tom Wolf and the Scranton pension boards.
"Moving to the Pennsylvania Municipal Retirement System will provide professional management expertise and it will also bring our pension plans in line with the best practices recognized by the commonwealth," Courtright said in a statement.
Harrisburg and other distressed cities have seen their pension funds' value return after joining the system, he said. "I acknowledge that this step will be significant, but by taking it, we move closer to securing our financial future," the mayor said.
Moving distressed plans to the independent agency figures to be one of the recommendations DePasquale's special panel on local pensions will make to Wolf. Release of that report could come in two weeks.
Scranton, in northeast Pennsylvania, is the 77,000-population seat of Lackawanna County.
At a City Hall press conference Wednesday, DePasquale said city officials neglected to properly analyze, document and implement the retirement benefit incentive Doherty provided to its non-uniformed employees who retired in 2002 and others in 2007.
Auditors from his staff reviewed legal documents and tapes of some meetings from 2003, the existence of which they discovered three weeks ago. Some of the tapes were mislabeled, city employees told DePasquale.
His report found that the double-pension benefits for the 25 employees who retired in 2002 - and 10 additional employees who were offered the benefit in 2007 following a lawsuit - adds an extra $266,880 annually to the city's pension costs. It also said that the total of annual payments for these 35 retirees is $533,760, or 53% of the $1,076,140 total annual benefits paid to all 121 beneficiaries of the plan.
According to the Times-Tribune newspaper, people who benefited from the incentive included former mayor Jim Connors, former councilman Daniel Noone and Terri Barrett, the wife of Tom Barrett, the pension board president at the time.
"I want to fully recognize that the actions outlined in Auditor General DePasquale's report began over a decade ago, with a different pension board, a different council and a different mayor," Courtright said Thursday. "But the decisions made then impact us all today. It's our job to fix it, to fix it now, and move on."
Gary Lewis, a private-sector financial consultant and former Republican candidate for mayor, blamed the pension crisis on a "systemic disregard for proper financial diligence and oversight" rather than a revenue-side problem.
"The solution to Scranton's problems isn't to raise money via taxes and bond issuances - we now have damming evidence proving it will just be wasted anyway," said Lewis. "The solution is wholesale overhaul and state oversight that forces proper financial management on a poorly run system."