HARRISBURG - The challenges of addressing municipal pension debt in Pennsylvania were evident as a House committee held a hearing last week on a bill to provide a new revenue source to the state commission charged with oversight of 3,200 municipal pension plans.

One salient fact is that many of these plans have only a handful of members - a reflection of the patchwork of small boroughs and townships throughout the state.

The measure sponsored by Rep. Mike Tobash, R-125, Pottsville, would earmark a small portion of a state aid fund for municipal pension plans to help the Public Employee Retirement Commission do its work of certifying municipal pension costs. The commission would get up to $617,000 annually from a $247 million fund built with revenue from a state insurance tax.

The bill would also exempt municipal pension plans with 100 active members or less from having to advertise and bid for professional services contracts. About 98 percent of the plans have less than 100 members and 68 percent have less than 10 active members.

The Local Government Committee heard testimony from Tobash, PERC executive director James McAneny and local government associations.

The above two provisions are linked, said Tobash.

In return for giving up some revenue from the aid fund to PERC, the small pension plans would be spared the cost of advertising and bidding if they want to change their financial advisor, he added.

"We are trying to give them some relief from expenses," said Tobash.

The small pension funds need more transparency rather than less of it, said the Pennsylvania NewsMedia Association.

"With a smaller number of participants and, presumably, a reduced pool of assets, more is at stake for individual participants," said Paula Knudsen, association director of legal affairs. "Eliminating advertising for municipal pension systems with fewer than 100 members increases the potential for cronyism and abuse."

However, McAneny said the bidding cost actually encourages smaller plans to stay with their financial advisor rather than seek a new one.

"Instead of encouraging competition, we actually killed competition at the local level," he added.

A compromise could require pension plans having to post a notice when they seek a new adviser, suggested Rep. Robert Freeman, D-136, Easton.

PERC would use the new revenue to upgrade to electronic filing for the actuarial reports that municipal pension plans submit, said McAneny. That job is now handled with paper forms.

Having a PERC earmark will reduce the amount each municipal pension plan receives in state aid, said Elam Herr, assistant executive director of the Pennsylvania State Association of Township Supervisors.

(Robert Swift is Harrisburg bureau chief for Times-Shamrock Communications newspapers. Email: rswift@timesshamrock.com.)