State House Sound Bites

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

Unions promise legal battle if pension benefits touched, leading lawmakers wary

Written by Mary Wilson, Capitol Bureau Chief | Feb 3, 2013 6:12 PM
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Some type of pension reform package is likely to figure into the governor’s budget address to the General Assembly on Tuesday, and both lawmakers and unions have adopted a defensive stance in anticipation.

Gov. Corbett has said he’s looking into reducing the unearned pension benefits of current and future state and public school employees to help address the state’s rising pension costs.

Republican Sen. Jake Corman, chairman of the Senate Appropriations Committee, said Friday that changing pension benefits alone doesn’t address the issue of the state’s pension debt, which tops 41 billion dollars, or the increasing contributions scheduled to pay down that sum.

“If we say, OK, we’re going to modify this, and oh by the way, really we still haven’t solved the problem, we’re still going to have to come up with 500 million next year… I’m not for that,” said Corman. “That doesn’t solve my problem. So I’ll look at any plan in its totality, and it’s got to deal with the entire issue of how do we reduce the entire contribution of the commonwealth to the fund?”

The two largest public sector unions in Pennsylvania said Friday that they’ll sue the state if their members’ pension benefits are changed.

“Not only that but we can’t even as labor organizations bind our members on a constitutional issue,” said Dave Fillman, director of AFSCME Council 13, one of the state’s largest public sector unions. The head of the largest school teachers union in the state said his group will also definitely sue over any changes to members’ unearned benefits. They say any changes would amount to a breach of contract, deemed unconstitutional in past state court cases.

Senate President Pro Tempore Joe Scarnati has said he’s wary of any pension reform plan that results in a legal battle.

“We’ve got to be able to find a solution to this that makes sense – that doesn’t involve legal challenges and a long delay of where we go, and the menu that the governor’s talking about, does it involve a real menu?” said Scarnati. “I don’t know. I need to see the menu.”

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Comments: 1

  • PA_Observer img 2013-02-04 12:56

    “If we say, OK, we’re going to modify this, and oh by the way, really we still haven’t solved the problem, we’re still going to have to come up with 500 million next year… I’m not for that,” said Corman. “That doesn’t solve my problem. So I’ll look at any plan in its totality, and it’s got to deal with the entire issue of how do we reduce the entire contribution of the commonwealth to the fund?”

    Jake's problem is he doesn't know the time value of money. In the year he was elected to his father's senate seat, 1998, the employer contribution to SERS was $310.5 million dollars. In 2012 dollars, that amount corresponds to $438 million. Four years earlier at the start of the Ridge administration in 1994, the employer contribution to SERS was $342.9 million, or $531.5 million in 2012 dollars.

    So, $500 million is a reasonable estimate for the pension fund costs based on the mid 1990's when the fund was "balanced". Now, one could mention the fact that Mr. Corman did vote for the 25% benefits increase and the subsequent employer funding reductions, but that would be pointless. However, railing against a funding level that is consistent with prior funding levels is disingenuous.

    Frankly, Mr. Corman is trying to ignore his past and fabricate a new history that justifies a 401(k) plan with a minimal employer match. The $500 million level is consistent with the old 2% per year of service pension and provides 160% match to the employees contribution. But, that doesn't touch the $3.6 Billion in deferred employer contributions since 1998. Of course, there's also interest on those deferred payments which needs to be added.

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