Allegheny County Controller Corey O’Connor wants a county Common Pleas judge to change the way the county calculates pension payments for some high-level employees — part of an ongoing attempt to shore up the county’s faltering pension system.
O’Connor is seeking a declaratory judgment on whether bonus payments should be included when officials calculate pension benefits, which are based on what an employee earned on the job.
Bonuses are currently “pensionable” — considered as part of the compensation that determines a pension payout. O’Connor said the practice could ultimately cost the county “hundreds of thousands of dollars” each year, with estimates starting in the half-million-dollar range.
The average pension payout for retired county employees is $2,600 per month, or $31,200 annually. But between bonuses and other compensation, “one person was calculated possibly $20,000 a month” in pension payments, O’Connor said. “[If] you have another 20 people that do that, you're in a lot of trouble quickly.”
O’Connor noted that he was not asking a judge to overturn bonuses that are outlined in union contracts. The issue he wants the courts to review affects a relatively small number of county employees — many at the Allegheny County Airport Authority — who receive major one-time, discretionary bonuses.
But O’Connor warned that the practice could be “death by a thousand cuts to our pension,” which is historically underfunded and facing insolvency by 2037.
Though employee contributions to the fund have increased in recent years, their annual contributions are about $90 million, while annual retiree benefit payments are approximately $138 million.
In an annual report released earlier this summer, O’Connor’s office gave county finances a mixed review, partly because of looming pension problems. At the end of 2023, the pension was only 31% funded (down from 33% funded the year before). And an S&P Global Rating released this month gave Allegheny County a stable outlook, but noted its assessment could take a nosedive “if the county’s pension plans remain poorly funded with no credible plan to achieve long term sustainability.”
If the county’s credit rating is downgraded, O’Connor said that could make it harder for the government to get bonds or borrow money for capital projects.
In a letter to the county pension board, Allegheny County Retirees Association president Jack Exler expressed support for the Controller’s legal filing. Exler said the association has “deep concern over the impact of including bonuses,” including potential effects on the fund’s future viability.
O’Connor also said his motion has support from other retirement board members.
He acknowledged that no matter what the court finds, the county will have to do more to bolster the pension system.
“For us, it's pushing the envelope to where this is going to save a little bit of money, but it's going to at least put you in a direction where you're looking at solutions to the problem,” O’Connor said. Ultimately, he said, the county might have to look at other funding sources, including the state. But the bonus issue is ‘“one small piece of a bigger puzzle that we're going to have to solve.”
