Capitol recap: no plan for municipal pension aid in state budget

     Gov. Tom Wolf, center, delivers his budget address for the 2016-17 fiscal year to a joint session of the Pennsylvania House and Senate, as the speaker of the state House of Representatives, state Rep. Mike Turzai, R-Allegheny, left, and Lt. Gov. Mike Stack, right, listen and applaud at the State Capitol in Harrisburg Pa., Tuesday, Feb. 9, 2016. (AP Photo/Chris Knight)

    Gov. Tom Wolf, center, delivers his budget address for the 2016-17 fiscal year to a joint session of the Pennsylvania House and Senate, as the speaker of the state House of Representatives, state Rep. Mike Turzai, R-Allegheny, left, and Lt. Gov. Mike Stack, right, listen and applaud at the State Capitol in Harrisburg Pa., Tuesday, Feb. 9, 2016. (AP Photo/Chris Knight)

    If aid’s delayed, certain municipalities could face penalty fees. The amounts, in some cases, would be tens of millions of dollars.

    Gov. Wolf’s proposed budget for next year includes more money for human services, affordable housing, addressing homelessness and local roads, bridges and traffic signals.

    But municipalities might lose a little when it comes to their retirement funds, with the elimination of the Public Employee Retirement Commission, or PERC.

    It’s a small state agency that administers about a quarter billion dollars in municipal pension aid (Pennsylvania’s home to 3,200 municipal pension funds, more than a quarter of the nation’s total) every year. PERC also analyzes legislation dealing with local pensions, as well as the statewide retirement systems for public school teachers and commonwealth employees.

    Wolf defunded PERC about six weeks ago with a line item veto of its $950,000 budget, saying its role analyzing pension bills is redundant and state aid could be handled by another agency.

    Which agency, and at what kind of savings, weren’t clear in Wolf’s budget proposal for next year released Tuesday because that’s still being worked out, according to his spokesman Jeff Sheridan.

    (The state Auditor General’s office, Pennsylvania Municipal Retirement System and state Department of Community & Economic Development have been suggested).

    But if the change delays aid long enough, some municipalities could face penalty fees. The amount depends on the size of the fund, its dependence on state aid and actuarial assumptions. It would’ve ranged between $6 and $53 million in 2014, according to a Keystone Crossroads analysis of PERC’s statewide data from 2014, the most recent available.

    To avoid that, the state’s keeping on a handful of PERC employees working on state aid on the dime of another department, according to executive director James McAneny.

    McAneny didn’t know which deparment. Sheridan wouldn’t say or confirm the retention of some PERC staff.

    It’s unclear whether PERC’s role analyzing legislation will be farmed out to another department, because Sheridan has said state pension funds themselves provide information to lawmakers that’s sufficient.

    There are just two statewide retirement systems, though, and 3,200 local ones. Unless another agency’s designated to do an independent review of local pension bills, the analysis will come from any number of sponsors, opponents, municipal retirement funds and others with vested interests in the outcome without one from a designated party that’s more removed.

    “There will be problems in sorting in out,” McAneny says. “But that has to be addressed by the General Assembly and the governor.”

    It’s also critical that pension legislation analysis is easy to understand.

    PERC’s succinctly-delivered expertise has been valuable to lawmakers, reporters, lobbyists and policy analysts. Stephen Herzenberg, executive director of the Keystone Research Center, is among them.

    “There is also a need for an independent voice in pension reform, although opinions differ on whether PERC provides that independent voice,” Herzenberg says.

    Herzenberg and others say the state’s Independent Fiscal Office could analyze pension bills instead.

    But like PERC, the IFO’s bills are paid by the legislature.

    McAneny, meanwhile, says he’s going back to being a lawyer for police unions, decades after leaving the private sector for PERC.

    “They said, ‘You were never gonna do that again.’ I said, ‘That was before I got sacked.’ I have to eat, you know,” McAneny said.

    McAneny’s exit comes after PERC’s actuaries came up with an analysis in December that differed from one by the statewide pensions’ actuaries. They weren’t making “an attempt to twist” things, but might make “an honest mistake” in “an attempt to accommodate timeframes.”

    “It’s not an attempt to mislead, but there’s just so much pressure to do it yesterday that honest mistakes happen,” he said earlier this week.

    He declined to comment on whether he feels Wolf’s actions are retaliatory, citing his concerns that other PERC staffers retain employment and the local aid program continue.

    “Anyone who’s been paying attention can make their own conclusion,” McAneny said. “It’s not rocket science.”

    PERC’s last day is Friday.

    So it seems unlikely House Republicans will file the injunction they’ve said they’ve been contemplating. But the House is scheduled to consider a bill that would restore PERC funding through June.

    Rep. Seth Grove, R-York, says he’s open to designating PERC duties elsewhere. But independent analysis is critical, Grove says.

    Grove says Wolf hasn’t followed proper procedure, either.

    “We can have those discussions, but it requires a legal change within the law. Something to come through the General Assembly, not a willy-nilly decision based on the administration administratively. That’s a law change, a statutory change that has to come in through the General Assembly,” Grove said Tuesday.

    Grove and others also say pension bills could be delayed without one change, in particular: repealing the state law that established PERC and its mandate to provide actuarial notes for all pension legislation after it’s voted out of committee. Without a note, there’s a wait of 20 legislative days.

    That window expired Tuesday for one municipal pensions bill that last moved in November.

     Editor’s note: this post has been updated to add a photo, quote and information about a bill.

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