HARRSIBURG – New figures show municipalities in Pennsylvania are facing more than $6 billion in unfunded liabilities.

As hard as it might be to believe, that total is actually a slight improvement over where things stood just two years ago – but the state as a whole and many municipalities in it have a long way to go.

The new numbers provide a snapshot of Pennsylvania’s roughly 1,400 municipal pension plans as they stood at the end of 2011.  The report is compiled by the state Public Employees Retirement Commission, or PERC, which oversees and analyzes state and local pension plans in Pennsylvania.

“What you’re looking at is really the effect of the improvement of the funding status in two cities: Philadelphia and Pittsburgh,” said James McAneny, executive director of PERC.  “But $6 billion is still a big number.”

Philadelphia’s funding ratio has improved from 45 percent to 50 percent in the last two years.  While the increase is small, the massive size of the city’s pension plan – which accounts for half the municipal workers and therefore half of the municipal pension costs in the entire state – means the improvement skews the rest of the state’s results.

Taking Philadelphia out of the picture leaves about $2 billion in unfunded liabilities spread across the remaining 1,400 municipal pension plans, with Pittsburgh accounting for around $380 million of that total.

For some context, the two state level public pension systems are facing a roughly $40 billion unfunded liability.

On the whole, there are 35 fewer municipalities listed as “distressed” in the new report when compared to 2010. Any plan that has less than 90 percent of the assets needed to pay its accrued liability is listed as distressed, while funds with funding ratios below 70 percent and below 50 percent are labled as “moderately distressed” and “severely distressed,” respectively.

Scranton is the big loser in the new report.  The city’s pension liabilities have grown by about $50 million since the last PERC report in July 2010, while assets to pay those costs have declined by about $5 million.

As a result, the city pension plans’ funding ratio has dropped from 47 percent – already in “severely distressed” status two years ago – to 34 percent this year.

Calls to the city business managers were not returned Friday.

For some cities that were already in trouble – Scranton leads the way, but Johnstown and Hazleton are newcomers to the “severely distressed” listing – things are getting worse.

In Johnstown, which dropped from 52 percent funding in 2010 to 47 percent this year, city financial manager Carlos Gunby said annual contributions were being made in compliance with the law, but legacy costs were pulling the overall funding level downward.

“The amount going in isn’t necessarily enough to cover the amount going out each year,” Gunby said.

Hazleton is another newcomer to the “severely distressed” listing, as their funding ratio has tumbled from 52 percent to 49 percent over the last two years.

State law prohibits cities like Scranton, Hazleton and Johnstown from changing their pension plans to defined contribution plans – similar to 401(k) plans that are common in the private sector – which could save money in the long term.

McAneny said many places could benefit from such a change, but reforms must be enacted at a state level.

Some municipalities have managed to start digging out from their problems.

In Montgomery County, the Borough of East Greenville was among the “severely distressed” municipalities two years ago, with less than 40 percent of their liabilities covered by assets.

In the new report, the borough has improved to 68 percent funded and moved into the “moderately distressed” category.

“We took a hard look at it a couple of years ago and we had to do something because it wasn’t looking good,” said East Greenville Mayor Ryan Sloyer.

The borough sought assistance from the Pennsylvania Municipal Pension Commission and has been making larger contributions to the plan the last two years, he said.

Like many of the other municipalities with underfunded pension plans, East Greenville had a relatively easy time climbing out of its pension hole because there are only a few employees on the borough’s rolls.

Most of the plans funded at less than 50 percent are relatively small municipal plans with only a few employees enrolled and less than $100,000 in liabilities.  Some of them are new plans that have only been established within the last few years.

Experts agree that the smaller plans can more easily fall into distressed status, but can also more quickly pull themselves out.

But on a larger scale, the answer is the same.

Higher contributions to the pension system have helped the city of Pittsburgh start back on the long road to recovery after the city’s pension system bottomed out at 28 percent funded in 2010.

Pittsburgh after the city decided to put a $145 million lump sum payment into their pension system earlier this year and dedicate future revenues from the city’s parking authority to the pension problem.

The city still has more than $350 million in unfunded liabilities and is still listed as “moderately distressed” because only 63 percent of the liabilities are covered this year.

Still, that’s a big step up from the 34 percent funding level the plan had in 2010.

Even though it is in recovery, Pittsburgh has a lot to teach other cities about how easy it is to get buried in pension costs.

For about a decade the city was using a 10 percent discount rate, which is the assumed annual rate of return for pension investments.  During that time, they never realized those high levels of expected returns and lost 40 percent of the value in their pension fund within a decade, McAneny said.

“It was obvious why. They weren’t putting in as much as they needed to,” he said.

Even in a time when most municipalities were assuming unrealistically high rates of return – usually around 8 percent – Pittsburgh stood out.  Now, most municipalities and the state’s two major pension plans are assuming lower rates of between 6 percent and 7.5 percent.

Still, you have to be fairly optimistic to think that pension funds will earn that much year-over-year for the next few decades, McAneny said.

In Philadelphia, McAneny said the improvement is due to the city sticking to a decades-old plan to slowly improve the funding of a pension plan that was once barely funded at all.