Luzerne County should use $8.6 million of a one-time $11.6 million windfall to pay an employee pension fund subsidy due this year, the county administration and outside financial adviser recommended Tuesday.
The problem of paying the subsidy late dates back years to the commissioner government in place before the 2012 switch to home rule, county Manager C. David Pedri told council members. Surplus revenue was not identified to get back on track until now, he said.
Pedri estimated the delayed payments have caused the pension fund to lose out on millions in investment earnings over years and possibly contributed to rising pension subsidies.
For example, the fund has generated an 8 percent return this year to date. With that return, the $8.6 million payment would generate $689,553 in investment earnings in a year.
Harrisburg-based Public Financial Management (PFM), which recommended the on-time pension payment, also advised the county to start paying its pension subsidies quarterly in the year they are due going forward. The county’s general fund operating budget will owe approximately $8.8 million in 2018.
PFM suggests the county keep the remaining $2.98 million in a reserve, which would reduce the deficit on the county books from $7.98 million to approximately $5 million.
Council members have the final say on how the money is spent, but both Pedri and PFM stressed the cushion the county has amassed is from one-time receipts and should not be applied to recurring annual expenses.
Using the money to avoid a proposed 2 percent tax hike for 2018 — an option that has been tossed out — would not be recommended by the administration because it could leave a revenue void in future budgets. Council members continue to formulate options to whittle down the proposed tax increase.
Several council members spoke positively of the pension payment plan at Tuesday’s work session. The administration is drafting an ordinance for possible introduction at the Nov. 28 voting meeting.
Councilman Harry Haas said the lost investment return from late payments must be emphasized to deter public criticism about spending the money.
Council Vice Chairman Tim McGinley said the pension subsidy is a mandatory bill owed by the county.
“It is not frivolous,” he said.
The county’s auditor also supports the pension payment because it will remove an unpaid liability from county financial records, said council Chairwoman Linda McClosky Houck.
Haas said he will propose using a portion of the windfall to cover one-time projects some departments have included in the proposed 2018 budget, which could free up funds to avoid a tax hike.
The $11.6 million came from five sources: prepayment of Children and Youth expenses last year, $800,000; this year’s untouched reserve, $540,000; unbudgeted state revenue obtained by Domestic Relations, $500,000; proceeds from settling baseball franchise litigation with Lackawanna County, $4 million; and reduced debt repayments this year from refinancing, $5.76 million.
The rest of the deficit can and should be reduced through “strong operating performance” and additional one-time revenue or savings in future years, PFM wrote in a report to council.
$15K settlement OK’d
In other business Tuesday, a council majority voted to:
• Pay a $15,000 settlement to end 2013 litigation filed by the estate of 20-year-old Gary Allen Jones, a West Wyoming resident who was found hanging from his neck in a cell at the county prison in December 2012 while he was incarcerated on a parole violation. The suit alleged the county failed to ensure Jones’ safety and sought damages exceeding $100,000. The county’s legal bills will total around $4,000.
• Finalize an agreement accepting new annual awards of $20,000 each from King’s College and Wilkes University to fund event programming and maintenance at the county-owned River Common recreation site along the Susquehanna River in Wilkes-Barre. Critics have complained the park, which includes an amphitheater and fishing pier/landing, is insufficiently maintained and underutilized.
Removed from council’s agenda, at least temporarily, was a proposal from Councilman Edward Brominski to place a question on the May 2018 primary ballot asking voters if they want to form a study commission to analyze the home rule structure. The committee would recommend whether to keep the current system, alter it or return to the old one, with voter approval required for a change.
Seven of the 11 sitting council members had voted in February 2016 to reject a proposal to place the study commission question on the ballot. Under council bylaws, the matter can’t be considered a second time unless one of the seven reconsiders or newly elected council members take office in January 2018, said Chief Solicitor Romilda Crocamo.
Citizen Walter Griffith, who last week lost his bid for county controller, urged council to act quickly to avoid the need for citizens to undertake the “daunting task” of obtaining 5,000 signatures to get the question on the May ballot on their own. Voters can start seeking signatures Jan. 2, he said. Griffith said he is not saying the current government is “going in the wrong direction” but believes a committee review would “not be detrimental.”