(The Center Square) — As another batch of municipal pension audits get released, Auditor General Tim DeFoor warns of shortfalls.
“Our audits make sure state pension aid is used as required by law, which helps to reduce financial burdens on local taxpayers,” DeFoor said in a press release. “Nearly a quarter of all the pension plans we support are in some state of distress. It is essential that our communities plan to make their pension payments on time to support our workers who take care of us.”
The state government provides aid to municipal pension plans thanks to a 2% tax on fire and casualty insurance policies sold by out-of-state companies. More than $400 million went out the door to almost 1,500 municipalities and regional departments in 2023, DeFoor noted.
The latest batch of pension audits found some minor issues. A mistake by Crafton borough in Allegheny County, for instance, led to an almost $20,000 overpayment to the municipality. A similar error in Chester County’s East Whiteland Township led to an $18,000 underpayment to the municipality. And in Westmoreland County, Ligonier borough had a certification error that meant an $11,000 overpayment in state aid.
The biggest state aid issue popped up in Montgomery County’s Upper Providence Township: a certification error meant the township was overpaid by almost $27,000 for its firefighter pension plan.
Usually, those mistakes are a result of flawed “internal control procedures” where certification forms aren’t checked by other city workers, as audit reports show.
Previous reviews of state audits have found that smaller pension plans aren’t the biggest offenders. Instead, it’s been larger cities in the commonwealth. The auditor flagged a $64,000 underpayment for West Chester earlier this year and a $26,000 overpayment to Lancaster in 2023.
But the auditor found significant problems recently with the City of Shamokin’s pension plan, categorizing it as in “moderate distress.”
“The plan’s funded ratio went from 56.7% as of January 1, 2021 to a ratio of 44.8% as of January 1, 2023,” the auditor noted. “We are extremely concerned about the funded status of the plan.”
Shamokin had inconsistent and unauthorized pension benefits, resulting in excess benefit payments of $95,000 to three retirees, the audit noted. It also gave benefits not authorized by the third class city code, leading to $86,000 in excess benefits paid out to five retirees.
Due to certification errors, the city also received a $47,000 state aid overpayment.
