Jeannette seeks to fund pension deficit
Pension contributions for the Jeannette police force and other city employees are exceeding the city's ability to pay, said the city's budget director.
“We are woefully behind in our pension payments,” said councilman Bill Bedont. “Pensions have grown out of control. If we didn't have the pension liability we have in the city, we would be in a more solvent position.”
To remedy the problem, council plans to increase the earned-income tax rate next year from 1.15 percent to 1.5 percent and will use the additional funds exclusively to pay the pensions of police, firefighters and municipal workers. The city held a meeting on Monday to discuss the 2014 budget, but the pension problem took center stage.
All municipalities are mandated to make annual pension contributions for their police, paid firefighters and municipal workers. The contribution is known as a minimum municipal obligation and is due at year's end. The city hasn't fully paid the 2012 MMO for police and will not meet this year's payment, Bedont said.
Jeannette has been taking a discount each year on the amount it owes the pension funds and paying interest on the unfunded amount, which adds to the city's debt. For 2014, the city will have to pay $536,000. The city still owes $160,000 of the $410,000 due in 2012. Jeannette's police MMO for 2014 is $536,000, Bedont said. The city's three paid firemen are due $89,000, and municipal employees $200,000.
Michael Foreman, a municipal government expert for the state Department of Community and Economic Development, said cities that have unfunded pension plans are allowed to increase taxes with state approval.
“When you reach the levels of distress ... this level of distress gives the city extraordinary taxing powers to meet these extraordinary obligations,” he said. State law allows cities that are struggling financially “to stay current on their obligations.”
Jeannette's pension funds have $9.1 million in assets and more than $14.5 million in liabilities, according to the Pennsylvania Employee Retirement Commission.
The police pension is creating the most financial pressure on the city.
The MMO has increased steadily since 2007, according to an audit by Auditor General Eugene DePasquale. That year the contribution was $129,377. By 2011, the contribution had increased to more than $347,000. In 2007, the fund had $6.3 million in assets and $7.7 million in liabilities. By 2011, that figure had increased to $5.7 million in assets and $9.8 million in liabilities, according to the state audit.
Foremen said municipalities have to find middle ground between meeting their pension obligations and finding the money to pay for local services such as street maintenance and garbage collection.
“It's a trade-off,” he said. “It's a balancing act that you have to juggle all the time.”
Mayor Robert Carter did not attend the meeting, but Mayor-elect Richard Jacobelli said he wants to reopen the budget in January once 2013 end-of-the-year figures are in.
During the campaign, Jacobelli said the cost and size of the police force must be considered in the city's finances. He was unhappy that council decided to reinstate a5 percent pay hike that police officers agreed to earlier this year and the reinstatement of a 10 percent pay raise taken by city administrators.
“I don't think that was a good move,” he said.
Jacobelli said police overtime, which will exceed $100,000 this year, “pushed us over the edge.
“This overtime is killing us.”
Richard Gazarik is a staff writer for Trib Total Media. He can be reached at 724-830-6292 or at email@example.com.