Audits of pension plans in Port Allegany Borough showed both the police and municipal plans were out of compliance for failing to implement distress remedies mandated in 2018.
The audits were released Tuesday by Auditor General Timothy L. DeFoor, and noted that current borough management was not aware of the mandatory requirement that had been “disclosed as a verbal observation during the prior audit.”
Act 44 of 2009 established a chart indicating levels of distress by what level the municipality was able to fund its pension obligations. Level one, minimal distress, is funding at 70 to 89%; level two, moderately distressed, is at 50 to 69%; level three, severe distress, is at less than 50%.
On Jan. 1, 2019, the police pension was funded at 50.6% while the non-uniformed pension was at 60.3%. In 2020, the Municipal Pension Reporting Program issued a notification that the borough was in moderate distress. On Jan. 1, 2021, the police pension was at 58.6%, while the non-uniformed pension was at 74.6%, the audit report noted.
In 2022, the Reporting Program notified the borough it was in Level II moderate distress. In 2024, the police pension was funded at 49.6% and the non-uniform was at 66.3%
The audit report noted the municipality “did submit a plan for administrative improvement” in 2019 in response to the notice of Level II status, but failed to aggregate its pension plans.
Auditors recommended the borough contact the Municipal Pension Reporting Program for guidance to implement mandatory distress remedies. The borough officials agreed with the findings.
“Our audits make sure state pension aid is used as required by law, which helps to reduce financial burdens on local taxpayers,” DeFoor said. “Nearly a quarter of all the pension plans we support are in some state of distress. It is essential that our communities plan to make their pension payments on time to support our workers who take care of us.”
State aid for municipal pension plans is generated by a 2 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 $404.73 million in aid to 1,461 municipalities and regional departments to support pension plans covering police officers, paid firefighters and non-uniformed employees.
