How Distressed are Pennsylvania Public Pensions?

There are over 1,400 public defined benefit plans in Pennsylvania which are required to file actuarial valuation reports with the state.  The 2011 numbers just came out and have been compiled and assigned distress score reports (81% average) where assets are compared to liabilities.  But an 81% funded ratio is not the scary part.  The scary part is that these numbers appear to be balderdash.*

Public plans are not subject to ERISA reporting requirements and are free to treat GASB statements as suggestions.  The official numbers are generated by either actuaries who will sign off on anything though they know better to public accountants and CFOs who will sign off on anything though they often don’t know better.
Just look at these Pennsylvania distress scores when sorted by funded ratio.  500 of the 1,400 plans are over 100% funded, including bankrupt Harrisburg at 114%.  Twenty of the municipalities are over 300% funded including Palo Alto at 3,116%.
Harrisburg reported $209,389,151 in assets and $183,162,448 in liabilities.  If that is so, why didn’t anyone think to use that extra $26 million to avoid bankruptcy?  But is it so?
Go to the Harrisburg website and from the latest CAFR (2009) look at the pages on pensions (145 through 147).  Projected through 1/1/2011  the Non-Uniformed pension supposedly has $77 million in actuarial value of assets and $56 million in actuarial liabilities for a 139% funded ratio.  The Combined Firefighters’ pension has $68 million in assets and $55 million in liabilities (124%).  The Combined Police Officers’ pension has $64 million in assets and $72 million in liabilities (88%) but here is the weird part.
As far back as the chart goes (2000) the contributions into the plans were for Non-Univormed $267,206 (for 2000 and paid with state aid), for Firefighters $609,609 (for the years 2000 to 2003 and all state aid) and for Police $3,966,430 ($2,881,484 being state aid and the remainder for the years 2007 through 2009 being the only money Harrisburg taxpayers have pumped into any of the plans).
Harrisburg’s pension funds are reported to be 114% funded while basically being on a decade-long contribution holiday.  What’s wrong with this picture?

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* I wanted to use the word bullshit here but in referencing the dictionary balderdash (senseless, stupid, or exaggerated talk or writing; nonsense) seemed a little more accurate than bullshit (something worthless, deceptive, or insincere) but it was close.

8 responses to this post.

  1. Posted by Anonymous on August 7, 2012 at 9:04 pm

    Hey Tough Love, why dont you do yourself a big favor and move to Penn, pronto. Looks as if the pensions will go bankrupt much sooner than Jersey. You will then be in your glory because of your delusion that your taxes will be substantially reduced when that happens.

    Reply

    • Posted by Tough Love on August 7, 2012 at 10:30 pm

      Better yet, you move ….one less Civil Servant sucking at the taxpayer’s pockets.

      I can’t wait for the onslaught of outsourcing.

      I have no illusion of reduced taxes. I’d just like the long-term rise to be minimal.

      Reply

  2. Posted by Anonymous on August 8, 2012 at 3:26 pm

    I can’t help but share that your observations about the City of Harrisburg’s pension plans reflect a knee-jerk reaction as opposed to a serious anaylsis of the situation. As the head of the state agency responsible for administering the city’s non-uniform and firefighter’s pension plans for since the mid-1980s I would like to vouch for the accuracy of the reported numbers and the funded status of those two plans. I would also like to point out that those numbers are based upon a 6% assumed rate of return – one of the lowest in the country.

    If their were anywhere that the numbers for those two plans could be challenged it would be in the disparity of the the actuarial value of our system’s assets and the market value. As of January 1, 2011 that difference was just 10% (Actuarial Value of Assets $1.713 Billion versus market value of assets of $1.542 Billion. I strongly suspect that dispersion is among the smallest in the world of public pension plans.

    And as to why no one thought to use the “extra” surplus from the plans to avoid the treat of bankruptcy – you might want to do a little more rseach into IRS tax qualified plans and the requirements of the trust aspect of the pension plans.

    Before being too critical of a situation you don’t understand, please be sure to get the details correct.

    James B. Allen
    Secretary
    Pennsylvania Municipal Retirement System

    Reply

    • Thanks for commenting and you’re right, it was knee-jerk, primarily because I couldn’t locate the actuarial valuation which perhaps you could point me to.

      It was knee-jerk because, unless plan benefits were frozen, it’s hard to believe that making minimal contributions over a decade would result in an overfunded plan.

      Being from New Jersey, it’s difficult to take the IRS seriously when it comes to enforcing the exclusive benefit rule (or any rule) as it might apply to public plans.

      Reply

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