Municipal Pensions In Good Shape: Will They Stay That Way?

Summary of Study

Act 44 of 2009 established distress levels and scores for municipalities based on the health of their pensions.

A municipality’s distress score is determined by the aggregate funded ratio (assets divided by liabilities) of all pension plans provided by the municipality.

In 2020, scores were assigned to 1,435 municipalities statewide. The municipalities have plans that cover nearly 30,000 active members in Philadelphia (funded ratio of 50 percent and a score of 2) to one active member in close to 200 municipalities. Over 60 percent of the municipalities had a score of 0 (no distress). Only six municipalities had a score of 3 (severe distress).

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Feature Charticle

Allegheny Institute for Public Policy

Findings:

  • None of the 138 municipalities in Allegheny County were severely distressed. Of the 84 municipalities at the level of no distress, 49 had a funded ratio of 100 percent or greater. 
  • 2020 scores were based on 2019 performance—a good year economically for the Commonwealth. However, the next scores, due in 2022, will be based on 2021 data. What will the economic and financial picture look like in 2021?
  • Considering the weakened situation state and local finances face in 2021, the General Assembly and the governor need to address commonsense reforms that will help in both the near term and long term to shore up weak performers and ease the burden of pension obligations on strong performers.

Read the full policy report here