State House Sound Bites

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

Senate panel moves scaled-back pension overhaul

Written by Mary Wilson, Capitol Bureau Chief | Jun 19, 2013 3:12 PM
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A state Senate committee has approved a scaled-down version of the governor's pension overhaul plan to address the commonwealth's pension debt.

The bill was re-written to include just one of the three prongs of Gov. Corbett's proposal - one that has been said to be far more palatable to legislators. The measure would enroll most future state and school employees into a 401(k)-style plan, instead of the traditional defined-benefit plan that locks in payouts according to a formula known in advance. Future police and public safety workers would still be enrolled in the existing defined-benefit pension plan. The change would apply to new hires beginning in 2015.

Democrats oppose the change. Sen. John Blake (D-Lackawanna) said other states that have made this move have incurred higher costs.

"I have two actuarial analyses in front of me that say that this could shift the cost of the existing defined benefit plan more onto taxpayers, and not off of them," he said. House Democrats say the cost could be in the tens of billions of dollars.

But Republicans on the Senate Finance Committee said those analyses don't take into consideration the risk that the state's pension debt will grow even more if pension plan investments don't make their expected returns.

"So in terms of what is a better decision on behalf of the commonwealth when it comes to pension policy, this is a lot better," said Browne. "This is a lot stronger."

Still, some point out switching new employees to a new plan will not pay down the state's pension debt, which Corbett has described as a "Pac-Man" threatening to eat up the rest of the state's spending because of scheduled payments that tick steadily upward in the next few years. The debt was most recently pegged at $48 billion dollars.

"Putting new employees into yet another, new pension plan does absolutely nothing to address that," said Sen. Glen Grell (R-Cumberland), who sits on a House task force on pension reform. "So we can say we did pension reform but we really didn't."

The bill voted out of Senate committee still must pass the full Senate and then go to the House.

House lawmakers heard Wednesday from the governor's Budget Secretary Charles Zogby, who has spoken on many occasions in support of passing Corbett's entire pension overhaul plan. Zogby encouraged changing to a 401(k)-style plan for future employees "if we do nothing else."

"He was basically - you know, I think - resigned to not being able to get the governor's whole package through by June 30," said Grell.


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Comments: 1

  • washnot img 2013-06-20 19:23

    I can only imagine what connected financial firm will be chosen to run a new 401k for school and state employees. Trying to figure out what a private company 401k charges to run a plan is almost impossible and I have read that over time it amounts to one third of any profits you make. The only one winning here are major financials firms again, backed by our Governor. Let's give the 2010 reforms a chance to work and keep new employee money flowing into the current plan.

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