State House Sound Bites

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

Pension overhaul plan takes borrowing as "linchpin"

Written by Mary Wilson, Capitol Bureau Chief | Sep 30, 2013 8:31 PM
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A Republican lawmaker who has long studied the state's public pension debt is getting ready to introduce an alternative plan to addressing it.

The proposal is a departure from those offered by Governor Corbett and other Republicans in the state Legislature.

Instead of mandating changes to reduce current state and school employees' pension benefits, Rep. Glen Grell (R-Cumberland) is proposing that the changes be optional, so as to ward off court challenges.

It relies heavily on borrowing to bring down pension payments scheduled to eat away at state and school district budgets. Such a move is viewed with skepticism by the Corbett administration. Grell said it shows the state is willing to make up for years of paying less into the public pension funds.

"I can't go with a straight face to any current employee who's been paying seven-and-a-half percent or six-and-a-quarter percent into this fund and say, 'we need you to make a concession' unless I'm able to deliver on the making up for that ten years of underfunding," Grell said. "So I think I would get zero percent take up on current member changes if we didn't have the borrowing to help make up for that past underfunding."

Grell said that, in the best-case scenario, his plan could address $37 billion of what he said is estimated to be a $45 billion pension debt.

"Admittedly, not every current employee is going to sign up for these changes," Grell said. "This is showing you what can be accomplished if all of the pieces fall together. If all the pieces don't fall together, the savings are going to be less."

Grell's proposal would also enroll future employees into a hybrid of the traditional pension plan and the 401(k)-style plan. He said such an approach eliminates large transition costs of switching to an all 401(k)-style system.

No one joined Grell on stage to show support for his proposal, a move the lawmaker explained was due to the fact that he had only just sent a co-sponsorship memo out to colleagues, and would not formally introduce the bill for a week or so.

"I believe our preliminary numbers here show this problem can be solved in a reasonable way," he said.


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