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Auditor General warns pension distress rising; advises strict minimum contributions
Summary
The Auditor General told lawmakers municipal pension plans remain a top fiscal concern, reporting prior stress levels and urging required minimum contributions and prudent investments to reduce risk.
Representative Malagari and others asked about municipal pension health and the administration of Municipal Pension State Aid (Grama). Auditor General Timothy DeFoor said when he began reviewing municipal plans about a third (33%) were in some form of distress; that figure fell to about 22% after COVID-era federal aid, but DeFoor said the number is increasing again.
DeFoor emphasized the legal requirement that municipalities make required minimum contributions to pension plans and told lawmakers that missing those contributions exacerbates long-term distress. "What we've learned is that some of these organizations... may say, 'we don't necessarily need to put in our required contribution.' What they don't understand is that eventually things level off," he said, urging adherence to statutory contribution rules.
Representative Brown pressed for detail on Act 53 (passed Feb. 2022) and how it changed premium‑tax allocation and grama distribution; DeFoor deferred to his deputy for exact rollout details but said Act 53 provides a floor in allocation calculations. Committee members requested written follow-up on Act 53 implementation and its effect on fund stability; Gordon Denlinger, deputy auditor general for audits, was asked to supply the department’s implementation details.
DeFoor also recommended that relief associations and municipal plans invest prudently and avoid overly risky investments; he said the department provides guidance and outreach to volunteer fire relief associations on oversight and best practices.
