I've written several times now that I don't know how Northampton County can avoid a tax hike next year. But yesterday afternoon, I met a statesman who explained how it can be done.
This year, the County is making a $13 ARC (required annual contribution) on the pensions. That's like making the minimum payment on a credit card. The County did well this year with investments. So next year, the County will have a lower ARC, but it will still be close to $13 million because these payments are based on a five-year average.
The suggestion is to pay only a $3 million ARC next year. That will giver the County $10 million in breathing room.
The downside to this suggestion is that it will be flagged by independent auditors and will damage the County's credit rating, making borrowing more difficult.
I do not endorse this plan, nor does the statesman who presented it. This just explains how it might be possible to keep a tax hike away another year, but at a very dear cost.
25 comments:
Kick the can down the road...not a good plan. Get prepared to sell Gracedale...35m plus over charges close to 40 million.
Bernie, you and I tend to be in the same ball park on most issues. On this one I’ll have to respectfully disagree. This type of action has been part of the statewide problem all along. While I have no intention of voting for Gov. Corbett, I will quote the apt observation from his Administration’s “The Keystone Pension Report, Fall 2012”, Office of the Budget:
“Act 40 resulted in the state’s underfunding of both SERS and PSERS by more than $5.9 billion when comparing what should have been contributed--the annual required contribution (ARC) -- with actual state appropriations.
The impact of Act 40, however, did not stop there. In the context of the state budget, Act 40’s underfunding of the pension systems had the effect of freeing up General Fund dollars that then became available to spend elsewhere. And spent they were… this “robbing Peter to pay Paul” budget maneuvering …
This same dynamic often repeated itself at a school district level, further contributing to the problem. Lower state contributions meant lower district contributions and, like the state, had the effect of freeing up dollars in local district budgets that could be and were spent elsewhere. Though some districts acted responsibly in putting funds into reserve accounts knowing a pension tsunami would eventually hit, many more regarded the lower contributions as new found money that made its way into new programs, more personnel, and higher salaries. No matter the final destination, the result was the same: an underfunding of pension systems while at the same time exacerbating future obligations”
Lighthouse, I do not agree with this suggestion at all. I better go back and make that clear.
Just added a paragraph to make clear that neither I nor the person who posited this idea supports it.
I support a tax hike and have thought it has been necessary in the last two or three budgets.
Unfortunately, periodic increases become necessary.
Coming from another state to the west of us a few decades ago, I was shocked when I first moved here at how easy property taxes could be raised without a "levy" on the ballot. That said, the opposite extreme of "over my dead body, no new taxes" isn't good either. Sometimes you just have to bite the bullet.
Agreed.
You are both too liberal for your own good. John Brown and the Republican team was elected to stop the county form its tax and spend ways.
Mr. Brown wrote that he would not raise taxes and I saved the mail. If he proposes a tax increase and breaks his promise, I will bring the email piece to the council meeting and ask him why he lied. A county council member ha already told me that no tax increase is really necessary.
County officials have said there is no need for a tax hike and that the county is sitting on a cash supply. Stop taking our money to feed your waste.
No tax increase is why Mr.Brown and his Republican team were elected.
Agree, no tax increase no way. Cut the bloated workforce. Freeze the pay of the overpaid administrators. Tell the unions no pay increase. If they don't like it let them strike.
Too many pantywaist services. Teach people early,in public schools how to prepare for their lives and teach the consequence of being a criminal and collecting welfare. After that ,it's who's fault? Too many paperwork exercises over there. My parents are nearly 86 they don't know any social agency phone numbers. Bridges, concrete, courtrooms , that should be about it. Too many services going to people that moved here to collect them --nonsense!! OLD PETER
It's misleading to make assumptions about pension obligations and how they impact credit ratings unless you are employed in that industry. Credit ratings, on a very simple basis, relate to having adequate revenues or the ability to have revenues to meet obligations. The county, which has dipped into reserves to meet current obligations, may be walking a tightrope on this point. However, the county has adequate ability to raise taxes to meet current obligations which does not adversely impact its credit rating. Pension obligations are confusing but are nothing more than actuarial assumptions on future commitments, rates of return and payroll growth. It would be entirely acceptable to forgo or reduce a payment if any of those factors would change and reduce the total obligation. I can think of many fully funded plans which had to increase contributions because of the 08 Panic, but may be whole or fully funded, again today. Without having all the facts, I cannot concur or disagree with you on this point.
A trial balloon? This suggestion looks like it came from the Chris Christie administration across the river. It's fiscally irresponsible. How about stop buying swamp land and eliminate the $9 million Gracedale subsidy. No tax increase needed.
Do you think we should sell gracedale?
Hey Peter... You can't educate kids when the republicans refuse to fund public education. Just sayin'!
How about just raising taxes and improving the community? We can only use austerity for so long. Pretty soon, we will turn into a pathetic place no one will ever want to move to or stay in.
Nursing homes are no longer a core function of county government. Counties (like most recently Lebanon) will continue to sell because of the higher benefit costs and restrictive reimbursement formulas.
John Brown and Council need to run Gracedale more like a business. That means following ALL the recommendations of the management company. That includes privatizing food service, laundry, and housekeeping functions. Unfortunately that would mean taking on the unions and there probably aren't 5 votes on Council (Peg and 4 Dems) to do that.
Allowing Gracedale to continue running massive deficits while underfunding the pension would be popular in the short run, but disastrous long term.
When the County pension fund was doing really well, the County did not make contributions to the pension fund and used the "escess interest" to fund other County programs. Instead of letting the money in the County Pension Fund, The County tapped those funds, Now it's payback time. Now the pension fund is short (through no fault of the employees or the people running the fund) and you talk of not funding the "ARC".
This is no different than the Federal Government raising the Social Security tax and then raiding the fund because it had more money than they needed at the present time.
This is the retirees money. The county took monies from the fund. Now its time to pay it back.
It sounds great to say "Hey, no new taxes. Cut waste."
However, this taken to extremes is like the sequester. How did that work out? Not well at all.
When government services start being impacted, when teachers are laid off, when maintenance ceases or suffers, are we all supposed to suck it up and say "well, we're tightening our belts and there is pain to be shared by everyone." Screw that. The people who say this don't need the services.
Didn't Christie just pull some hijinx in NJ that involved cutting pension funding, with a promise to make the payments later, similar to this?
It is tiresome and troubling to see politicians always kicking the can down the road, instead of coming up with real solutions.
Who is this anonymous "statesman". Is he from Northampton County"?
I neglected to ask if I could use his name before posting this idea, which he does not endorse himself. So I feel uncomfortable using his name, especially for something he would oppose. He was just pointing out this is one way to dodge a tax hike.
"Do you think we should sell gracedale?"
The people have spoken, and I believe in majority rule. I was a strong advocate for Gracedale's sale, but believe more strongly that we must follow the people's will. I will never advocate Gracedale's sale again. That will have to be someone else's battle.
Anon 8;11- With all due respect,Sir or Miss,Your statement would be true if this was the case.Many of the same issues that cost school districts ,and to county costs as well,its people,but who are they ? It is my opinion that at least locally EASD ,has too much 'DEAD TIME" in the school year.Even after I noticed the current administration had NOT canceled class on what I term 'weenie days' they did a much better job of late. I suspect that they are intentionally keeping their head count up with undocumented addresses and illegal aliens. Now if this would be audited by some outside contractor and I 'm wrong then I would shut up about the draw on the system and thus the need for staffing.
Unfortunately the window of opportunity to sell the white elephant Gracedale has closed. Even IF the county and electorate would choose selling Gracedale, the market is no longer there. They could have sold it for $35 million, which, along with the savings in annual county contribution would have prevented a tax hike for years to come. The people of Norco deserve a tax hike and can only blame themselves for it. Gracedale is a black hole and will never break even, unless there is major privatization of its operations. Lease the laundry to a private company that pays taxes in Norco. Contract out housekeeping and food services. And allow premier to hire its own maintenance and nursing staff. AFSCME has a strangle hold on the facility and there is no way Gracedale will ever be able to compete with the private sector with the millstone of public employees' unions around its neck. But keep chirping about how Gracedale has "turned the corner", how admissions are up and the census is up. They are just treading water out there until the next tidal wave submerges them in debt again.
"the market is no longer there."
Bull. Lebanon County just sold their home last month for $25.5 million for a 324 bed facility. They had 9 bids.
Gracedale was never instituted to break even. It was to take care of the folks that took care of the tax rolls for 35 yrs of their working life - not everybody in from some deadbeat island that moved here from New Jersey. Additionally the administration has allowed people to dissolve Grandma's assets to park her in this facility ,allwhile they are driving luxury cars as result many times.-CHANGE THE RULES OF ADMISSION, or sell even at a lesser price,make up your mind.
Anonymous 8:49- FYI Gracedale has cost the county almost double since the private administration has been hired!! Maybe if they would have left it alone it wouldn't have lost so much money!! The Afcme union gave back 3 million dollars, what did the rest do to help out! 0000.00 too many chiefs and not enough Indians!
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