McClure Explains Why NorCo's Proposed Budget Calls For No Contribution to Pension Fund

Over the past few days, I've received a number of comments complaining that NorCo's proposed budget for 2026 calls for no county contribution to the pension fund. At Wednesday's budget hearing, Council member Jeff Corpora asked Exec Lamont McClure to explain the risk of not putting any money into retirement. 

McClure: "I'm glad you asked that question. There is no risk. Currently, in the pension fund, we have $563,181,986.53. ... Our pension fund at the beginning of the year was funded at 90.7%. It is now presumably, because it has grown, funded at 93%. Your average pension fund in the Commonwealth of Pennsylvania is funded at 77%. Actually, nationally, the average is 77%. ... The taxpayers have been overtaxed for the pension and specifically, to the tune of $103,469,300.00. That's one year of the general fund real estate taxes. One entire year of the taxes we collect for the general fund went into the pension fund. We're going to rebalance that. It will be back down to about - I suspect - 85% funded at the end of next year."

Council member John Goffredo said McClure was being "too optimistic" McClure said he has had this argument for many years with former Fiscal Affairs Director Steve Barron but believes that a county contribution this year would be "funding liabilities well into the future that should be shared with future taxpayers because the whole purpose of this is to spread out the liability over the years, not to have it disproportionately paid for by taxpayers now ... .."

In addition to a pension fund for retirees, the county also maintains a $58,296,110.55 trust fund that pays medical expenses for eligible retired employees, which are those who started on or before 2010. McClure explained that since no one who was hired after 2010 is entitled to retiree health benefits, there is no reason for the county to continue paying into this fund. 

NorCo Cuts Pension Benefit For New Hires

At their December meeting, Northampton County's Retirement Board voted unanimously to support Council President John Cusick's motion to cut the pension benefits for new hires.

Employees hired before 1/1/17 are in something called a 1/60 Classification. The formula is as follows:

(1.67%) * (years of service) * (3yr (highest) average salary)/12 = monthly annuity

Based on my calculations, which could be flawed, a 30-year employee whose highest three years results in an average salary of $35,000 would see a monthly annuity of $1,461.25.

Employees hired on or after 1/1/17 are in something called the 1/80 Classification. The formula is as follows:

(1.25%) * (years of service) * (final salary) = monthly annuity

My calculation is that a 30-year employee whose final salary was $35,000 would see a monthly annuity of $1,093.75.

That's a major benefits reduction. Fiscal Affairs Director Jim Hunter explained that's what's going on in some other counties. Lehigh County went from a 1/60 classification to a 1/70 classification in January 2015. Monroe County has been 1/80 since 2011. But Berks is still 1/60.

In other business, Executive John Brown requested the Board to deny a cost-of-living increase for retirees in 2017,though they were eligible for a 0.03% increase. Brown and Cusick opposed the increase,primarily because it would cost the county $549,428.

Peg Ferraro, a Council member seeking reelection who sits on the Retirement Board, voted to cut retirement benefits and deny a COLA to retirees.

Glenn Geissinger, another Council member who is seeking reelection and who also sits on the Retirement Board, was a no-show for the Board's most important meeting of the year.

Exec John Brown: County's Pension Up 7.9% in 2016

NorCo Exec John Brown reported to Council last night that the County's pension finished 2016 with $357.9 million, a 7.9% increase in just one year. That pension is now 87% funded.  The County also has an OPEB fund, which is up 8.4% He also indicated that this year, the fund has increased four per cent.

This is good news to the county employee, but also good news to the taxpayer. Better funded pensions need a smaller annual contribution.  

Bethlehem Township Changes Pension Plans For New Workers

In what Bethlehem Township Manager Melissa Shafer calls a "major success for the township," there's a big change coming to the pension plans for all new hires, except for those in the police department. Instead of participating in a defined benefit pension plan, it will be a defined contribution plan.

What's the difference?

A defined benefit plan pays a retired employee a specific or defined benefit, based on years of service, If the stock market crashes and the pension fund struggles, the township has to dig into its own resources. Also, the payments continue until death. In contrast, a defined contribution plan is one in which an employee makes a defined contribution into a fund every year, which he can then draw down after retirement. The payments stop when the well runs dry. The employee also assumes the risk that the pension fund may perform poorly.

Township Commissioners also voted, at their March 16 meeting, to make different changes to the pension plans, mostly to enable gay married couples to participate.

Is Corbett Wrong to Call For Pension Reform?

It's only the biggest problem plaguing municipal government. But the state legislature is kicking the can down the road. Again. Ironically, Governor Corbett is not fighting the Democrats, but his own party.

His proposal only applied to future hires, and could not legally have any impact on teachers or government workers already enrolled in a plan. What Corbett was proposing is no different than what Bethlehem Mayor John Callahan did two years ago.

I can see only one reason for opposing the modest pension reform proposed - greed.

Scheller's "Let Them Eat Cake" Moment

Lisa Scheller, who was just elected Chair of Lehigh County's Board of Commissioners and is thought by some to thinking about running for Executive, has come up with an idea that every shallow-thinking conservative will just love. It screws no-good public sector workers and saves money, too. Basically, Scheller, along with Vic Mazziotti, wants to reduce county payments to the pension fund from 5.5% to just 4%, as explained in a recent Morning Call story. Any thinking conservative would reject this notion out of hand. Let me explain.

Lehigh County's public sector pensions are made up of two different kinds of plans, defined benefit and 401ks.

Under the defined benefit plan, taxpayers guarantee the benefit, regardless whether the economy tanks. This is the pension plan that has most municipalities in trouble. But Scheller and Mazziotti won't mess with that plan. They can't. It is illegal to a pension plan once it is set.

The solution here is to limit defined benefits for future hires, as Mayor John Callahan did in Bethlehem. Scheller has proposed something similar to this in Lehigh County, and it certainly sounds reasonable.

Where Scheller and Mazziotti really go astray is with the 401k pensions. Under this kind of plan, which is much kinder to the County budget than a defined benefit plan, employees kick in 5% of their salary. The County matches the employee contribution. Legally, they can go anywhere between 4.0% and 5.5%, but the County's pension board has always stuck with the higher amount.

Why? It's not because County officials are padding their own pensions, as Scheller suggests. The reason is to encourage employees to participate in a 401k type plan for their retirement over the defined benefit. It helps to sell that to the employees if they know the County's match won't be touched or subjected to political manipulation.

How much money would the County save by reducing its contribution from 5.5% to just 4%?  By my calculation, the will save just $47,000 to generate a great deal of bad will and ensure that everyone stays in the defined benefit plan.

In 2014, the gross wages covered by County real estate property taxes is around $62 million. Using the 5% required employee contribution times 1.5% (the difference between 5.5% and 4.0%) the reduction would be less than $47,000.

What really frosted me was when Scheller told The Morning Call that, unlike those wealthy County workers, has no guaranteed pension fund.

I believe her. She doesn't need one. And since she brought the subject up, let's go into what she does have.
- For one thing, a 7,100 square foot, 15 room, 6 bath mansion.
- For another, ownership of a family business successful enough to allow her father to donate $50 million to a college in 2012.

Yet she wants to deny those that are saving for retirement the ability to earn an extra 1.5% on their contributions. She is actually encouraging employees to stick with defined benefit plans.

Brilliant.

Scheller also complains it's a conflict of interest for pension board members to vote on these matters because most of them participate in the pension.

Under that reasoning, she can't ever vote on a Budget because it affects her tax bill. Under that goofy logic, she certainly had a conflict of interest when she voted for reassessment that reduced her tax bill by $3,400.

To save a  $47,000, Scheller and Mazziotti would guarantee that County workers avoid the 401k like the plague.

Sure, $47,000 is a lot of money. But guess what? Lisa and her husband donated more than that ($65,000) to two candidates last year - Ott and Mike Schware.

This is no reform. This is nonsense. Allentown blogger Michael Molovisky claimed she had the "taxpayer's back," but quite the reverse is true. He plan would alienate the workforce, drive thm into the wrong kind of pension and save a mere $47,000 in a $360 million budget.

If Scheller wants to close the $8 million deficit that she helped create, all she has to do is find 170 more items like this.

Stoffa Praises NorCo Pension Success

Municipal pensions have become the mother of all budget busters. This monster is the reason for Allentown's unpopular water lease. It's the reason for Easton's commuter tax. And in Bethlehem, it has gobbled the annual casino host fee and still wants more. But in Northampton County, it's a different story.

In his report to County Council last night, Executive John Stoffa noted that the pensions has grown from $161 million in 2009, to over $302 million as of last Friday. This success has made a cost of living increase possible for retired County employees.

Stoffa credits investment consultant Pierce Park as the reason for the pension's success, and expressed hope that the new Executive will use this company as well.

In other business, Director of Human Services Ross Marcus told Council that a contemplated bond issue, designed primarily for bridge repairs, will also feature improvements to the County's nursing home, Gracedale.

Priority will be given to a new emergency generator system, advises Marcus. That system failed during last year's hurricane. "We need to do a better job of being ready," remarked Marcus.

This bond will be limited. "We are not going to be able to do all the capital improvements [at Gracedale] we would like to do," said Marcus, explaining it will take several years

Thanks to Pensions, Allentown School District Facing $40 Million Deficit

Allentown School Director Scott Armstrong, a conservative, never shies away from controversy. But liberal or conservative, we all need to pay attention to him when he rings the alarm about the pension crisis in the Allentown School District.

"What has happened to public education? Why has providing a basic education become so expensive? This is the question facing the Allentown School district as it moves toward the finalization of its budget for the next school year.

"Budget projections indicate in that five short years, with an annual 4% school property tax increase, the district will face a $40 million dollar deficit on a budget of approximately $275 million. What exactly is causing this becomes clear when one studies the numbers. While the district's operating and debt service expenses rise at a rate that roughly matches inflation, the cost of personnel skyrockets. Although a portion of this is due to the escalating costs of health care, the real culprit lies in the retirement benefits paid by the school district on behalf of its covered employees. The reason this increase is so great is because the retirement benefits are in the form of a defined benefit program.

"Defined benefit plans are the most expensive type of retirement program there is. The amount of the retirement benefit remains constant once the employee has retired and is based on payment options and the expected life of the employee at retirement. At one time the standard of pension plans, defined benefit plans are becoming obsolete because of the inherent high cost of the guaranteed payout.

"Much more common today are defined contribution plans. This is a once and done contribution and does not lock the employer in to guaranteeing income after retirement. The standard of the Public Schools Employee Retirement System is the defined benefit program. While this type of benefit is very rare in almost every other economic sector it remains the standard in the public school system? Why?

"Our state and local elected officials are clearly the guilty parties, as they have mandated these benefits not only for themselves but also for the teachers working in the Pennsylvania public school system. The current crisis, which results from their largesse, is a matter that must be dealt with quickly and directly. In the ASD, no reasonable amount of tax increases and staffing cuts can bridge the yawning gap between revenue and expenditures that the fixed pension benefit is imposing on the school district.

"Clearly the state needs to take action. The governor’s office and house and senate leaders need to provide legislative relief from the threat posed to the state’s public school system by defined benefit programs. In addition, public school employees need to become realistic about their expectations for retirement in the current financially challenged and tumultuous economic environment, which experts agree could last into the foreseeable future."

Why The High Pay & Benefits For Easton City Council?

Q. Easton City Council is among the highest paid - I think they are the highest paid - in this area. Their annual salary is $9,371 and they also receive complete medical benefits. Is that correct?

Panto: "That is correct."

Q. I know there was a movement afoot four years ago to stop that, and I don't think it went anywhere.

Panto: "Well, it went to an independent study commission, who came back with a recommendation that the benefits and the salary stay the same. I'm not sure I agreed with it, but I certainly voted for it. I think if you're going to set up an independent commission to make a recommendation, those people are spending their time and energy to look at that situation. We should at least support it unless it's so far off that it's ridiculous.

"City Council has not received an increase in their salaries I think for ten years now."

Q. Well, you realize that in Northampton County, Councilmen only receive $7,500, mre than $2,000 less than an Easton City Councilman, and there, they receive no benefits.

Panto: "I don't disagree with any of that. I agree with it, bt that is a Councilmanic type action. It's not for me to - I do make recommendations, and I did make that recommendation that we look at, especially, the pension.

"More than anything, more than the dollars abut the salary and more than the dollars about the health benefits ('cause we're self-insured; as long as we have healthy Councilmen, which fortunately, we do, it doesn't cost us a lot of money), my real concern is the pension.

"It affects the pension immensely because our actuarial assumes that a Councilman could someday become a Mayor or another full-time employee of the City. Their years on Council, I don't believe, should be one for one. I think it should be a third. You have to work three years to get one year of pension eligibility.

"We had Council members in the past - Mike McFadden, Tom Goldsmith are the two most recent ones who served on City Council and earned some longevity, and then became a Mayor and increased their pension considerably. All within the law. But that is one thing I thought we could change."

I'll bring you the rest tomorrow. Dos Sal Panto miss teaching? What does he think of the Ambassadors? How many new businesses has he brought to Shadtown? You'll find out tomorrow.

Bethlehem's Pension Fund Managed by Callahan's Biggest Contributor

When independent auditor Tracey Rash reported to Bethlehem City Council on the sad state of Bethlehem's finances, she noted that the Callahan administration completely missed its $2 million pension fund payment in 2009. She also called attention to two "unusual investments." She told Council Prez Bob Donchez, "I can't address the risks associated with the investments. What I can say is that it caught my eye because it isn't a typical investment."

After a little digging, I realized that these "unusual" investments were in hedge funds. What's wrong with that? For one thing, they make up 12% of the pension fund, which is a pretty high percentage. Another problem is that they are so risky that only a handful of Counties will invest in them. Hedge managers usually get 20% of whatever profits are earned, giving them an incentive to gamble with your money. Most troubling of all was learning that Bethlehem actually has invested in "life settlements," an unregulated industry that buys life insurance policies from senior citizens and then waits for them to die ahead of schedule, like ghouls.

Why would Mayor John Callahan, whose City is floating into a financial abyss, agree to these bizarre investments? A reader has answered that question. A Morning Call report lists the securities firm handling the pension - Barroway Topaz Kessler Meltzer Check, LLP - as Callahan's biggest Congressional campaign contributor. As of the end of June, individuals at that firm had kicked in $29,317, with another $4,800 from the firm itself.

This firm also gave $10,000 to Callahan's state campaign fund in 10/8/08.

Oh yeah, Callahan wants to reform Wall Street.

Bethlehem Pension Fund Making Death Bets and Other Little Details

Do you have life insurance? You do? Boy, do I have a deal for you!

Let's say your life insurance policy will pay your beneficiaries $100,000 if you keel over. Well, I'll give you $60,000 now, and all you have to do is assign that policy to me. Your kids don't need that money anyway. Of course, once you sign away, I'll be calling you once a week to make sure you're still feeling well. I'll also be giving you lots of drinks to try, even if you complain they taste a little funny.

This is what's known in the alternative investment biz as a "life settlement." Believe it or not, it's one of the more ridiculous "hedge funds" in Bethlehem's pension fund. I told you about that yesterday. Bethlehem is playing "You bet your life!"

Why not just take all that dough and play craps at the casino?

Two Pennsylvania Counties - Westmoreland and Allegheny - have been crazy enough to get mixed up in this morbid scheme.

After all, who could possibly complain? Dead people? Senile seniors? Well, the Government Accountability Office (GAO), for one, is concerned about a "lack of clear, consistent state oversight." Another little group called The Securities and Exchange Commission (SEC) wants life settlements classified as securities.

Senator Herb Kohl (D-Wi), who chairs the U.S. Senate Special Committee on Aging, is a little more concerned about the pitfalls faced by seniors:

"Most seniors don’t know that when they sell their policy, their health records can be passed off to multiple third parties as their policy is resold time and again. Most seniors are also unaware of what their tax liabilities are, or that they may be uninsurable in the future. Furthermore, most seniors may not know that they are participating in insurance fraud if they purchase life insurance with the intent of flipping it for a life settlement. Known as stranger-originated life insurance, or “STOLI,” such scams have led to a spike in litigation since 2005. In Florida alone, insurers have filed three multi-million dollar federal lawsuits in the past year alleging that the true nature of the life insurance transactions were misrepresented."

In their quest for a quick buck, Callahan's crew has turned a blind eye to the warnings of the GAO, SEC and Senator Kohl. Moreover, there's something inherently distasteful about a public pension investing in funds based on the hope you die soon.

What's next, Soylent Green?

Other Little Details

(1) Hedge funds make up a whopping 12% of Bethlehem's pension fund. Even alternative investment cheerleaders would probably agree that percentage is simply too high.

(2) Mike Shone, a pension fund manager for many of our Counties, tells me only a handful throughout the state - about three or four - are willing to take the risk of investing in hedge funds.

(3) Northampton County's Director of Fiscal Affairs, Vic Mazziotti, tells me most hedge fund managers are paid 2 and 20, i.e. they get 2% of the investment up front, followed by 20% of whatever is earned. Thus, they have an incentive to take risks, hoping for a big payout. And if they lose, it's only money.

Your money.

Bethlehem City Pension Investing in Hedge Funds

Bethlehem Business Administrator Dennis Reichard is currently exploring the idea of buying out some long-time employees. Based on an independent audit showing that the City finished last year $8.5 million in the red, he might want to start with himself. Among many other problems, Bethlehem actually missed its annual $2 million pension contribution last year. A few years before that, Mayor John Callahan had to borrow $34.6 million to make up a shortfall in the police and fire pensions. Now, it appears that City pensions are investing in hedge funds, and enough to bother the City's independent auditor. Let me fill you in.

$34.6 Million Needed to Replenish Pension Fund

Between 2000 and 2002, a combination of bad investments and unforgiving stock market led to a $20 million loss in the Christmas City's fire and police pensions. Ho. Ho. Ho. In 2004, the State ordered Mayor John Callahan to come up with $34.6 million, enough to cover both the loss as well as the amount the City should have earned over those two years.

Conocrd Public Finance, now a faithful Callahan campaign contributor, was only too happy to propose one of those painless bonds. You know, the kind where you make no payments at all the first year. They added this "will not have a negative impact on the City’s credit rating."

Council member Jay Leeson had no interest in the Municipal Novocaine being offered by Callahan's Financial Dentists, but was instead concerned this was probably the worst fiscal crisis in Bethlehem's history. "[T]he origin of the City’s crisis dates really back to a pattern of borrowing from Peter to pay Paul, and draining the surplus funds from municipal authorities, such as the Bethlehem Authority, the Housing Authority, the Parking Authority.”

As we've since learned, things could and would actually get worse.

Leeson argued the only way out of this crisis was Municipal Root Canal, a tax hike. "You don’t borrow money and then invest it in the stock market unless you can afford to lose it. But that is essentially what we are doing is borrowing money to put it in the equity markets. That assumes we can afford to lose it. We cannot afford to lose it, given the circumstances that the City is in. We cannot afford to assume that risk."

This was unthinkable to Mayor John Callahan, who insisted (in 2004) that the City had turned the corner economically, that Leeson is just painting "doomsday scenarios" while he "rolls up his sleeves" a lot and presents "creative solutions." People like Leeson are just "irresponsible."

Callahan's pain-free bond was approved, after which the City's credit score was reduced by S&P. Subsequent years proved Leeson was, if anything, too optimistic.

City Misses $2 Million Pension Payment.

Last year, the Callahan administration demonstrated its creativity and responsibility by missing its annual pension payment, set at $2,047,975. It finally caught up in April, thanks to the casino. Bethlehem was required to pay $139,198 more than if it had paid on time, but the City denies this is any form of late fee or interest penalty. It probably would be irresponsible for me to make that suggestion. City administrators assure Council President Bob Donchez it will never, ever, ever, ever, ever, ever, not ever ... ever happen again. Ever.

I'm sure this will have no impact on the City's next S&P rating.

Despite $20 Million Loss and Missed $2 Million Payment, City Pension Invests in Hedge Funds

At last week's Finance Committee meeting, City Council President Bob Donchez was understandably concerned when auditor Tracey Rash mentioned "unusual investments" in the City pension fund. (You can see their exchange here).

Donchez: "This pension investment. Is this something that you're concerned about? Because if we go back to 2006 ... 2005, we took a bond out for the pension, to fund it. Is this a very high risk or am I completely wrong?"

Rash's answer? "I can't address the risk associated with the investment. What I can say is that it caught my eye because it wasn't a typical investment in a pension fund. ... It was enough to make me look at the pension investment law and make sure you were in compliance with the law and make some inquiries to your Solicitor and Financial Advisor."

Translation. "Are you folks out of your frickin' minds? After borrowing $34.6 million and then missing a pension payment completely, why the hell are you investing in something this stupid?"

The two investments that caught Rash's eye are in Graham Global Investment Fund & Green & Partners, LP. A google search quickly revealed that these are hedge funds.

What Exactly Are Hedge Funds?

According to a Securities and Exchange Commission (SEC) staff report, a Hedge Fund is "an entity that holds a pool of securities and perhaps other assets, whose interests are not sold in a registered public offering and which is not registered as an investment company." It's a $2 trillion industry where managers are not required to report how much money they oversee or how much money they make or lose each month. As explained in an University of Maryland article, hedge funds are unregulated and exempt from SEC disclosure and registration. This enables them to earn much higher returns than your usual mutual fund, but they are more risky. "They are highly secretive investment vehicles." Wall Street reforms have had no impact on them, either.

New York City's three pension funds for police officers, firefighters and civil employees are considering investing in these loosely regulated hedge funds. According to a CFO at one of the Lehigh Valley's leading corporations, they do deliver positive returns, even in a down market. He considers them a legitimate option to diversify a large size pension fund. But this assumes the fund selected has a successful track record, something Bethlehem's pensions funds can't claim.

That University of Maryland article tells us 326 hedge funds went out of business in the first half of 2006. In May 2007, two Bear Stearns hedge funds lost approximately $1.6 billion of capital due to overexposure to bad mortgages. Likewise, the Swiss banking firm UBS AG shut down a hedge fund in May 2007 that lost more than $124 million from similar bad investments. In the UK, public and private pensions alike are wary of hedge funds because of their perceived risk, potential for big losses, and concerns about a lack of liquidity.

In the eyes of their detractors, hedge funds are little more than a Ponzi scheme. “There were accepted practices going on in the industry up until 2008 that in retrospect look like a problem. Funds were using the liquidity of incoming investors to pay out the established investors without testing the investments themselves. It was hard to see this until everyone hit the exit at once and everyone starting asking for their money back at the same time."

Given Bethlehem's troubling history with its pensions, it's no wonder that these investments bother Rash.

Why Don't Hedge Fund Investments Bother Mayor Callahan?

On his Congressional Facebook page, asks, "Where was Congressman Dent when Goldman Sachs sent up to $4.3 billion in taxpayer fund to overseas banks?" He's "glad that the Wall Street reform bill passed last night because it eliminates taxpayer funded bailouts and holds Wall Street CEOs accountable."

Does Callahan realize that money invested in hedge funds could easily go to offshore accounts? Has it dawned on him that there is no accountability at all?

2012: The Public Pension Crisis is Coming

The Mayans were off by one year.

Would You Like One Dip or Two?

Despite the headline, this story is about law enforcement. Honest!

It's a foregone conclusion that Bethlehem Police Commissioner Randy Miller will be easily confirmed this Thursday as Northampton County's new Sheriff by County Council. After all, he was the unanimous choice of President Judge Kimberly McFadden, Court Administrator Jim Onembo, County Executive John Stoffa and Director of Administration John Conklin. Even Miller's boss, Bethlehem Mayor John Callahan, penned a letter of recommendation. Most would agree that Randy is the First Spear at the Lehigh Valley's finest police department, and that presumably has something to do with him. Who could possibly object to this appointment?

Northampton County Bulldog Ron Angle, of course.

Ron's a little miffed to find out about this appointment from the newspaper. Once word leaked out, apparently in Bethlehem, Angle believes Stoffa owed Council members the courtesy of a call. He's also concerned that no insider was chosen. "What kind of message are we sending to people who already work hard in that department?" he asks. But what really bothers Angle is that Miller will be yet another in a long line of government double dippers.

Who doesn't like a double dip? The private sector.

Sarah Cassi, in her Express Times report, notes that Miller, age 53, will collecting a $64,000 per year public pension on top of the $76,997 public salary proposed by Stoffa. His annual income for managing a less stressful and smaller department will skyrocket from $92,000 to $140,000. That's a great deal for Miller, but what about the taxpayer? "Couldn't he be asked to accept a smaller salary?" asks Angle.

Miller's situation is nothing new. His predecessor, Jeff Hawbecker, was a retired state trooper collecting a pension. Now he's collecting two. In fact, the entire Sheriff's Department is really little more than a retirement home for retired state troopers and ex-Allentown cops. It's very common among teachers, cops and others able to retire young after twenty years on the job.

They will tell you they contributed to their pensions during most of their careers, but neglect to mention that these defined benefit plans require the taxpayer to make up any shortfall.

Now there are those rare employees who actually wait to retire until they're 65, like Executive John Stoffa. I even know one County row office worker in her 70's, who would be nearly impossible to replace. They've earned their pensions. But for tens of thousands of younger state and local workers who retire, this is a scam.

This, along with defined benefit pension plans, need serious reform.

Northampton County Reduces Bond From $22MM to $16MM

An uncertain economy prompted Northampton County Council last night to reduce a contemplated $22 million bond to $16 million. Members instead voted, 8 to 1, to support funding for juvenile detention center ($5.5 million) as well as parking deck($1.5 million) and bridge repairs ($1 million). In addition, the County will refinance $8 million in previous bonds at a lower rate. Charles Dertinger was the sole dissenting vote.

When Diane Neiper asked why the County could not use funds on hand, County Executive John Stoffa answered with an ominous warning about the pension fund. "We put $6.5 million in, we just found out we have to put $6.7 million in. Next year, it's going to be more. We can't keep gobbling up money from that fund balance or we're going to have to raise taxes. That retirement fund is looming there with significant numbers behind it."

Dertinger: $70 Million Pension Fund Deficit Just a Paper Problem

Yesterday, I told you about Allentown's $51 million pension funds deficit, which was minimized by Allentown Mayor Ed Pawlowski during budget hearings. He dismissed dire warnings from City Controller Bill Hoffman as "speculation. ... No one knows which way the market is going."

That was then. Hizzoner is whistling a different tune these days, claiming ''[n]o one saw this tsunami that has taken over the country, that has affected the state and us at the local level.''

Pawlowski should have a few words about that tsunami with Northampton County Council member Charles Dertinger. In Northampton County, the pension funds deficit is hovering around $70 million. To make matters worse, the county will also be paying somewhere around $15 million in a swaption deal that went sour.

To deal with little problems like this, Council Prez Ann McHale suggested replacing its current four-person finance committee with a committee of the whole at last night's Council meeting. Her justification? "We are facing difficult and tough financial times right now." Her idea was heartily endorsed by Council member Ron Angle. He loves meetings. But he noted his support is "probably enough to sink it on its own."

That's exactly what happened. By a six to three vote, Council rejected McHale's idea. Only Joe Capozzolo and Ron Angle agreed with McHale.

Lame duck Diane Neiper flatly stated, "I don't go for it." Rev. Mike Dowd explained that every council member is already free to attend every committee hearing. That's certainly true, but only committee members have a vote.

Here's what I believe Dowd and Neiper were really thinking. "Look Ron, damn it, we listen to you enough. If you tell us you voted against that swaption just one more time, we're coming after you. Why don't you get another damn radio show?"

Charles Dertinger was probably thinking the same thing, but just had to offer a ridiculous explanation that dismisses the gravity of pension fund deficit and the swaption liability. "These are paper problems. This is not $70 million we need to make up tomorrow. We're not looking at a doomsday sequence here."

Actually, we are. Dertinger, like Mayor Ed at budget time, has his head in the sand. A few months down the road, Charles will be saying nobody could have predicted this financial tsunami.

After Dertinger was done, a tsunami erupted, but it came from the mouth of Council member Ron Angle. "The reality of the $70 million deficit is that it has to be made up in a five year stretch. It's not a paper loss; it's a real loss." He's right. But then Angle mentioned, about 700 times, that he voted against the swaption. I can't be sure from where I was sitting in the peanut gallery, but I could swear that Neiper actually started singing.

McHale should have pulled a Pawlowski and proposed a committee of fifteen "outside experts," most of whom are campaign contributors.