State House Sound Bites

Capitol reporter Mary Wilson covers Pennsylvania politics and issues at the Pennsylvania state capitol.

A telling moment amid pension talk

Written by Mary Wilson, Capitol Bureau Chief | Feb 27, 2013 10:26 PM
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The heads of the state’s two public pension funds are trying to put a good face on their underfunded status.

At a hearing before the state House Appropriations Committee, the director of the State Employees’ Retirement System encouraged lawmakers to put the state’s $41 billion pension debt in perspective.

David Durbin said the systems were even more drastically underfunded in the 1980s, and as the economy began to rebound, so did the funds.

“Time is probably our greatest ally,” Durbin said. “The reason we came out of the underfunding in the 1980s is not just the investment program but the compounding nature of time.”

Durbin called changes to the state’s pension payments and benefits significant, passed as they were with Act 120 of 2010. The overhaul rescheduled the required payments by the state and school districts to their respective pension funds, creating a spike in funds in coming years, but then a leveling off of required contributions.

“Time helps us,” said Durbin. “It helps us to cure some of the funding shortfalls that we have, because when you have money, you can make additional money out of that. So in addition to the potential for additional revenue, from whatever source that may come, you need to have time.”

It’s something you hear from two of the state’s largest public sector unions: let Act 120 work, give it 20 years, and the funds will be in much better shape.

But state Rep. Glen Grell (R-Cumberland), emphasized the point that waiting for the pension funds to regain their footing would take up to 30 years based on projections, and the state and school districts would have to supplement the pension funds with billions of dollars in the meantime.

“Would I be fair in saying that, yeah, we might feel good 20 years from now but it’s going to be pretty painful to get there if we don’t do anything other than let Act 120 take its course?” said Grell.

“Yes this is hard,” said Durbin.

“That’s correct,” said Jeffrey Clay, director of the Public School Employees’ Retirement System.

“Yeah, OK,” said Grell.

The moment during this particular budget hearing was like countless others in the debate over proposed pension system overhauls – acknowledgement of the problem, but no consensus on a solution.

The governor has proposed changes that would shrink the scheduled payments the state must make to the pension funds, reduce the future benefits of current state and public school employees, and enroll future public workers into a new kind of 401(k)-style retirement plan. The proposal is being attacked by unions and Democrats as unconstitutional and ineffective.

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