June 1, 2016

Municipalities in Distress 101: Easton



Imagine courtesy of the Wikimedia Commons.

When you think about municipal success stories, Easton, Pennsylvania, might just be on that list. After all, its success in fiscal stability led to improving the city’s Standard and Poor rating from a BBB in 2008 to an A- in 2011 and this year, to an A+. It’s one of only a handful of A+ ratings in the state.

So, what’s the problem?

Easton’s convenient location places it near New Jersey and New York. While this provides many opportunities for Easton residents, it also necessitates additional crime prevention measures. Over the last several years, the city has hired 11 new officers for the Easton Police Department, leading to increased public safety spending overall. However, every new officer that is added to the police force also represents additional, future municipal pension costs and impacts to other city departments.

In Easton, public safety costs (including pensions), represent 48% of the city’s total budget every year. According to Mayor Sal Panto, “Hiring [more police officers] has forced us to hire fewer public works employees.” That means there are fewer employees for things like sanitation, parks and recreation, and repairing potholes on the roads throughout the city.

Mayor Panto is taking steps to help address the municipal pension funding crisis. Easton city government has refinanced pension bonds to a lower interest rate, and negotiated some changes in pensions for new public safety hires. By lowering their benefit cap from 70% to 50% of final average salary, the city will see positive changes in the future.

However, there’s still the current problem of pension costs. In 2008, Easton’s minimum municipal pension obligation was about $600,000. Today, it’s $5 million and growing, estimated to hit $6 million this year. That’s $6 million a year before funds for any other city services are budgeted.

Easton may not be in danger of entering Act 47, but that doesn’t mean their pension problems are any less dire. The first step to fixing the problem is to enact municipal pension reform. But Easton doesn’t have to go it alone. Tell your PA state legislators that you want them to #fixthenumbers.