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PENSION CRISIS: Municipalities wait their turn

While the legislative stove is heating up for 2013 and ideas for state pension reform are simmering, interest in a municipal fix has been lukewarm at best. The consensus among some lawmakers and members of the Corbett administration is that debate and, eventually, a solution to cover state pension debt already incurred and to adequately fund future benefits must come first.

The two state-level pension systems — the Public School Employees’ Retirement System and State Employees’ Retirement System, commonly known as PSERS and SERS — have run up more than $41 billion in unfunded liabilities.

If viable reform measures are found, that plan could be replicated or used as a template for municipal pension reform, state Budget Secretary Charles Zogby said.

“We really have not been looking at municipal pension reform,” he said. “Some municipalities are in a different place. Many of them have challenges, but not all of them do.”

Lingering legacy costs from pensions and other debt challenge local budgets and make higher taxes more likely. The state shifting the burden for services through cuts it must make because of increased pension debt only exacerbates the problem and hampers business development.

That’s because distressed local governments are less likely to consider business-friendly options — tax incentives, for one.

“Something needs to be done. We all know the legacy costs,” said Eric Montarti, senior policy analyst for the Pittsburgh-based Allegheny Institute for Public Policy. “How do we get from identifying the problem and coming up with a solution to churning through the legislative process?”

New to the debate is a proposal from the state’s auditor general to consolidate municipal pension plans.

The debt

Excluding Philadelphia, Pennsylvania’s roughly 1,400 municipal pension plans have a little more than $2 billion in combined unfunded liabilities, according to the state Public Employment Retirement Commission, which tracks the progress of local and state pension plans.

Pittsburgh alone accounts for about $380 million of that remaining total.

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