In late 2011, the City of Chester was outvoted 2-1 in arbitrations with the police and firefighter’s unions. As the opinions below show, the dissent laid out strong grounds for an appeal to overturn the decisions, and also foretold of the pension crisis that could potentially ensue if nothing was done. The DCED Act 47 Coordinator knew about these decisions and their impact because of their oversight of Chester and never pushed the City to appeal them.
Just as troubling, for at least the last 8 years, Pennsylvania’s Auditor General has noted deficiencies related to the Chester’s funding and handling of its pensions. During the most recently issued audit report of the Police Pension Fund, the Auditor General found four major violations, all of which related to the City’s failure to fully comply with past audit recommendations. See Auditor General Jan. 4, 2019 Letter Enclosing Compliance Audit Report for the Police Pension Fund for the Two Years Ended December 31, 2017 (“Letter”) at pg. 4 (“[t]he findings contained in this audit report repeat conditions that were cited in our previous audit report that have not been corrected by city officials.”)
Those four repeated violations were:
- Failure to fully pay the Minimum Municipal Obligation (“MMO”) of the Plan (Audit Report for Two Years Ended December 31, 2017 (“Audit Report”) at 4, 10-13)(noting that the City last paid the MMO in full 2014);
- Providing excess benefits inconsistent with the Third Class City Code and the 2001 Monroeville opinion which increased pension costs and reduced the amount of funds available for investment purposes or the payment of authorized benefits or administrative expenses (Id. at 4, 5-8). This condition was raised in the Auditor General’s “prior eight audit reports” (Id. at 5);
- Inconsistent pension benefits between the plan’s governing documents and the collective bargaining agreements (Id. at 4, 9-10). This condition was included in the “prior five audit reports” (Id. at 9); and
- Untimely deposit of state aid into the police pension fund (Id. at 4, 14-15).
The Auditor General stated that “we are extremely concerned about the funded status of the plan” which received a designation as “Level III severe distress status.” See Letter at 5. The Report also stated that “[t]he deterioration of the plan’s funded status has been exacerbated over time by conditions noted in the Comments section of this audit report as well as the city’s continued inability to meet its minimum funding requirements under Act 205…” Id. at 6.
The Auditor General’s compliance audits of the Fire and Officer and Employees Pensions also note that those pensions have for years, like the Police Pension, provided excess benefits inconsistent with the Third Class City Code and applicable law, which has increased pension costs and reduced the funds available for authorized benefits.
The DCED sat by and watched each year for over 8 years as the City failed to make the required pension contributions. The various recovery and exist plans issued by the DCED Act 47 Recovery Coordinator over the years acknowledged the pension issues. The DCED knew in real time how those obligations were mounting and the DCED failed Chester by doing nothing.
The Auditor General Reports for the last several years, as well as the Act 47 plans and amendments, are linked below.