Scranton pension plans improving, Pennsylvania auditor says

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Scranton’s employee pension plans showed, for the first time in years, “noticeable, across-the-board improvements,” that include stronger funding and reduced debt levels, Pennsylvania Auditor General Eugene DePasquale said.

Still, significant work remains for all three pension plans, DePasquale told reporters at Scranton City Hall on Thursday.

Funding levels increased in all three employee pension plans, unfunded pension liability dropped by $55.2 million, and there were no audit findings. DePasquale said this contrasts with earlier audits that showed the firefighters’ pension fund nearly exhausting its funds and employees double-dipping on pension benefits.
“Yes, slow and steady sometimes wins the race,” he said. “It appears that the city of Scranton is finally moving in the right direction.”

Scranton’s bonds are junk. S&P Global Ratings, the only agency that rates the city, assigns BB-plus, one level into speculative grade. S&P in August 2017 upgraded the city from BB after it sold its sewer system and earmarked a majority of sale proceeds to retire more than $40 million in high-coupon debt.

DePasquale reported three years ago that 35 employees in Scranton, the 76,000-population seat of Lackawanna County, were improperly obtaining double-pension payments for more than a decade. That cost $266,880 a year. A hearing officer ruled in favor of the city in discontinuing the benefit, which a Lackawanna County judge’s ruling affirmed in October.

According to DePasquale’s latest audit, which covered 2016 and 2017, the police pension plan showed the greatest improvement in meeting future obligations to retirees, as funding levels increased to 48.6% in 2017 from 28.8% in 2013. The non-uniformed employee plan jumped to 37% from 23% funded, while the firefighter plan went to $26.8% from 16.7%.

Scranton still must make some tough budget and financing choices, said DePasquale, as the city’s annual required pension contribution jumped to $18.8 million in 2017 from $3.8 million in 2010.

The city is looking to emerge from Pennsylvania’s workout program for distressed communities, known commonly as Act 47, which Scranton has belonged to since 1992.
In September, Judge James Gibbons of the Lackawanna County Court of Common Pleas ruled against the city of Scranton in a taxpayer lawsuit that accused the city of breaching a state tax cap under the Act 511 state law.

The city argued it did not fall under the Act 511 ordinance since it has a home-rule charter.

“The taxes collected cannot simply be labeled ‘Act 511’ in one instance, but not considered so in another,” Gibbons ruled. “These are labels of consequence, not convenience.”

Earlier this year, DePasquale said, Scranton received $3.7 in state pension aid from a 2% state tax on casualty and fire insurance premiums paid to out-of-state insurance companies.

DePasquale, a Democrat, called on state lawmakers to fix Pennsylvania’s pension-funding crisis.

“Scranton still has enormous legacy costs and a limited tax base,” DePasquale said. “City leaders can only do so much.”

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Public pensions Budgets Lawsuits Eugene DePasquale City of Scranton, PA Commonwealth Court of Pennsylvania Commonwealth of Pennsylvania Pennsylvania
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