Auditor General DePasquale Urges Municipalities with Distressed Pension Plans to Ensure Correct Use of Special Municipal Tax Revenues

Auditor General DePasquale Urges Municipalities with Distressed Pension Plans to Ensure Correct Use of Special Municipal Tax Revenues

GETTYSBURG, PA — Auditor General Eugene DePasquale recently stated current audits found that three municipalities with distressed pension plans made mistakes in how they funded their plans, prompting him to warn other municipalities to make sure they follow the law.

“I’m looking out for Pennsylvania taxpayers by making sure municipalities use residents’ hard-earned tax dollars exactly as the law requires,” DePasquale told attendees at the Pennsylvania Municipal League’s 120th annual summit in Gettysburg, Adams County.

State law allows municipalities with distressed pension plans to boost local Earned Income Tax rates to provide extra money to help stabilize their employee pension plans. The collections are known as Special Municipal Tax revenues.

Auditors found that the cities of Hazleton, Jeannette and York used these special tax revenues to replace general fund contributions to the pension plans. Under state law, the special tax revenues may only be used to supplement general fund contributions – not to reduce or replace them.

“The math around this important calculation can be complex, meaning municipalities should rely on actuarial guidance to understand precisely what is owed and from where the money must come,” DePasquale said. “Using an incorrect calculation could leave a municipality behind in pension obligations without officials even realizing that a mistake has been made.”

DePasquale thanked the Pennsylvania Municipal League for educating officials in municipalities with distressed pension plans how to correctly use Special Municipal Tax revenues.

To view the audit reports and learn more about the Department of the Auditor General, visit www.paauditor.gov.

Source: Pennsylvania Department of the Auditor General

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