The news for the City of Chester was bleak last week as the Pennsylvania auditor general released a scathing report on the state of the city’s pension plans.
Auditor Eugene DePasquale said at the end of the year, the city will owe more than $15 million to its three employee pension plans, which includes more than $9 million in outstanding contributions to the police pension plan.
The audit covered Jan. 1, 2013 to Dec. 31, 2015.
“Chester cannot manage this pension problem alone,” DePasquale said. “The state may have to step in to guarantee retirees continue to get the benefits they earned and to stop one of Pennsylvania’s cities from becoming insolvent. Without changes, the current situation is just not sustainable… I suspect that Chester does not have an extra $15 million lying around. We are extremely concerned that Chester’s police and officers and employees pension plans may be the first in the state to run out of money.”
Currently retired Chester employees are in a panic. One retiree questioned the overall management of the city and its finances.
“What exactly am I supposed to do if the money is not there?,” asked the employee. “I worked for the city for many years and never thought something like this could ever happen.”
DePasquale said the problem has been compounded by cops and firefighters working exorbitant hours of overtime, which in turn, increases their pension.
The auditor general said one police officer raised his monthly pension from $3,618 to $10,272 by working 3,504.50 hours of overtime in a 12-month period. The officer earned $155,808 for additional hours, which raised his yearly salary to $240,525. His annual pension is now $123,264. Based on a seven-day work week, the cop had to work 15.3 hours a day, every day, for 365 days in a row.
Twenty-five police and firefighters retired on non-disability pensions during the audit period and the overtime for these 25 retirees alone costs Chester an additional $843,504 per year in pension payments, which could add nearly $9 million in additional benefits every 10 years.
Seven of the 14 police retirees have annual pensions of more than $90,000, including three who have pensions of more than $100,000 a year.
By working overtime, eight of 11 firefighter retirees added at least $1,230 a month to their pension benefits, including two retirees who added more than $3,000 a month to their pensions.
One firefighter worked 2,012 hours of overtime in a year to raise his monthly retirement pension from $3,917 to $7,660. This retiree earned $89,840 in overtime to earn a salary of $188,844. His annual pension is now $91,920.
“Police and firefighters work hard and put their lives on the line for the communities they serve,” DePasquale said. “But, some of the overtime reported here in Chester is just unbelievable. It is not humanly possible to work double shifts for an entire year with no days off. If legitimate, these sort of hours are unhealthy and potentially dangerous to the employee, co-workers and the public’s safety.”
The question has arisen: who approved this amount of overtime?
“It is not common practice for an employee to approve their own overtime,” said a source familiar with the city’s finances who asked not to be named. “There are channels for this and a set protocol to follow. The buck stops on somebody’s desk. It’s important to find out who that somebody is.”
DePasquale, in the audit, said the city, which has been an Act 47 financially distressed city since 1995, did not pay its required employer contributions to the police fund in 2014 and 2015.
“Chester owes approximately $9 million, plus accruing interest,” the audit revealed. “By Dec. 31, the city owes another $6 million of employer contributions to its three employee plans for 2016. If the current obligations are not paid by the end of the year, interest will begin to accrue on those delinquent contributions as well. The failure to fully fund the municipal contributions due could result in the withholding of future state pension aid.”
Pasquale said the city’s employee pension plan is one of the worst-funded plans in the state at 10.9 percent funded; the police plan is 31.4 percent funded; in contrast, the firefighter’s plan is a very healthy 96.3 percent funded.
The police and employees pension plans are so badly depleted that, based on current funding levels and benefit obligations, they will run out of money in less than 60 and 18 months, respectively.
An amended 2011 audit indicates that as of Dec. 31, 2011, when Republicans were preparing to turn power over to incoming Democrats, Chester City had $2.5 million in reserve funds and all minimum municipal obligations had been met.
Among other things, the current audit says there was an incorrect certification data error in the police plan which resulted in a $7,746 underpayment of state aid. Chester did not timely deposit $1.02 million in state aid to the police plan in 2014 and 2015, and a pension benefit was modified in the police and firefighter plans without conducting a cost analysis to document the impact on the plans.
The City of Chester’s pension audit reports are available online at: (www.PaAuditor.gov)