State House Sound Bites

Capitol reporter Katie Meyer covers Pennsylvania politics and issues at the Pennsylvania state capitol.
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Lawmakers grappling with high costs of pension proposals

Written by Mary Wilson, Former Capitol Bureau Chief | Feb 18, 2014 5:41 PM
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How much will the clearest piece of the governor's pension proposal cost? About $4.7 billion, according to the two state public retirement systems.

Directors of the pension funds, facing an unfunded liability (or debt) of roughly $45 billion dollars and counting, told state lawmakers Tuesday that Gov. Corbett's proposal to lower state payments into the pension plans will provide budgetary relief for the state but billions of dollars in added costs to taxpayers - and that's in the short term.

"I don't see how we embrace more underfunding as a fix or as a cure," said Rep. Madeleine Dean (D-Montgomery), said about the governor's proposal.

When he unveiled his spending plan two weeks ago, Gov. Corbett charged lawmakers with passing some kind of pension overhaul that redesigns pension benefits for state and school employees. But Corbett's own spending plan is predicated on savings that will come from reducing the state's scheduled payments (or collars, in state budget jargon) into the funds, in order to free up funds for other government programs.

For Rep. Bill Adolph (R-Delaware), chairman of the House Appropriations panel, the $4.7 billion estimated cost underscored why he's hesitant to lend his support to the governor's plan without some kind of pension plan redesign attached to it.

"Lowering the collars is also a method of increasing the debt unless you have a coinciding reform or something that helps the system down the line not to pay out as much as they are currently," Adolph said.

The Corbett administration is considering an overhaul to public pensions that would generate as much as $7.4 billion dollars in savings for the commonwealth over a period of 30 years, according to the governor's spokesman and Rep. Mike Tobash (R-Schuylkill), who is drafting the plan. It's not clear if that would cover the costs of reconfiguring the state's payments into its pension funds, as it did most recently with Act 120 of 2010.

Dave Fillman, director of AFSCME Council 13, the largest union representing state workers, said he's still suspicious of the proposal until he sees details. "I don't know exactly what those details are," he said.

"I have shared the basic design," said Tobash in response. He can reel off a list of particulars of his pension proposal, which would remake pensions of future hires to be a hybrid of the traditional, defined-benefit pension and a 401(k)-style plan. "The funding mechanism will need to be debated," he said, referring to the other piece of the argument when discussing the state's gargantuan pension troubles: the structure of the retirement benefits to workers, and then the way the state pays down what it already owes them.

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