A recent report from Auditor General Timothy L. DeFoor showed 25% of municipal pension plans in Pennsylvania are in some state of distress, including three regionally.

Port Allegany Borough is considered moderately distressed, while Johnsonburg Borough in Elk County and Galeton Borough in Potter County are considered minimally distressed. All other pension plans in the counties of McKean, Elk, Potter or Cameron were listed as fully funded.

“Local government pension plans are essential to making sure those who dedicate their life to public service have the pension we promised them,” DeFoor said. “We’ve seen some improvement in the number of pension plans in some sort of distress; however, more needs to be done. Those in charge of those plans need to take steps to make sure the money is managed appropriately, invested wisely and local contributions are made.”

Municipalities are legally obligated to make their required contributions to their pension plans. If they do not, DeFoor said, the burden will fall to the taxpayers in the form of higher taxes or difficult choices in funding community projects and personnel.

Municipalities are considered in some state of distress if their pension plan(s)’ aggregate funded ratio — measuring the amount of assets available to pay future benefits — is less than 90 percent funded. Categories of distress include:

• Minimal — municipalities with a funded ratio between 70 and 89%
• Moderate — municipalities with a funded ratio between 50 and 69%
• Severe — municipalities with a funded ratio less than 50%

The auditor general’s report on distressed municipalities indicated that Port Allegany’s funded ratio was at 59% in 2024, Johnsonburg Borough was at 81%, and Galeton Borough was at 79%.

“Our report provides a snapshot of the condition of local government pension plans throughout the commonwealth,” DeFoor said. “Ninety-eight percent of pension plans in Pennsylvania are considered small, and small pension plans generally have higher administrative expenses, are more affected by the dramatic increases in municipal contributions and suffer more from low investment returns caused by often volatile market conditions.”

State aid for municipal pension plans is generated by a two percent tax on fire and casualty insurance policies sold in Pennsylvania by out-of-state companies. In 2024, the Department of the Auditor General distributed a total of $405 million in aid to 1,461 municipalities and regional departments to support pension plans covering police officers, paid firefighters and non-uniformed employees.

To find a municipality’s most recent pension audit report, visit paauditor.gov.

In the City of Bradford, the funded ratio was listed at 105%; in Bradford Township, 116%; Foster Township, 122%; Corydon Township, 141%; Kane Borough, 111%; Keating Township, 98%; Lafayette Township, 93%; Liberty Township, 118%; Mount Jewett Borough, 297%; and Smethport Borough, 136%.