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How Scranton's pension system took a nosedive and what other cities can learn from it

A view of downtown Scranton.
Lindsay Lazarski/WHYY
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A view of downtown Scranton.

Underfunded pensions are a problem across the state, but Scranton is in particularly dire straits. As part of Keystone Crossroads' series on underfunded pensions, Kate Lao Shaffner spoke with investigative reporter Terrie Morgan-Besecker. Morgan-Besecker has been covering the Scranton pension crisis for The Times-Tribune in Northeast Pennsylvania.

You've noted that even up to the year 2000, Scranton's pension funds were actually flush with money (due to record market yields in the 1990s). And yet just 10 years later, the funds are in bad shape. What happened?

Well, there were a couple of major factors. One of the big things was the stock market crash—which affected funds across the state, of course—but Scranton was really particularly hard hit. They lost about $21 million dollars. But there are some other things that happened here as well.

Some of the main things were some retirement incentives that were given to employees that really impacted the funds. And there are some real serious questions about how diligent the municipality was in reviewing disability pensions.

One of the big things is that because Scranton is a distressed municipality, it's been able to reduce its minimum municipal obligation, which is the amount that it must pay to the fund each year to ensure that it can continue to pay future and current benefits.

Since 2009 they've been able to reduce it by 25 percent. They should've put in roughly $47.9 million dollars but because they got that reduction, they've only put in $37 million. So that really has a big impact on the plan. It certainly helps them in the bottom line for each of their budgets for the year, because they're not having to come up with that amount of money, but it really really hurts the plans in the long run.

This is part of a series of stories about Pennsylvania's municipal pensions, which has aired on WPSU this week and last. Read the full version of this report at Keystone Crossroads' website. Keystone Crossroads is a statewide public media initiative reporting on the challenges facing Pennsylvania cities. WPSU is a participating station.

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