State House Sound Bites

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

Pension overhaul plan could save $11 B for state over 30 years, actuary says

Written by Mary Wilson, Capitol Bureau Chief | May 28, 2014 5:01 PM
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Photo by G.R. Wilson


House lawmakers have the actuarial analysis they need to start collecting votes on a measure to overhaul the state's pension plans.

A state commission central to the debate over changing public pension benefits in Pennsylvania says its consulting actuary finds that the amended House proposal would save more than $11 billion for the commonwealth over a 30-year span.

The measure would change pension benefits only for future state and school employees, setting up a hybrid plan - part would be the traditional defined-benefit pension, and part would be a 401(k)-style plan. Current employees are enrolled in a defined-benefit pension plan.

"We've offered a plan here that I believe is simple," said Rep. Mike Tobash (R-Schuylkill), the bill's sponsor. "It is clear that this plan design will reduce costs. It will give us the ability to limit our spending, develop savings, shift risk, and move more to what the private sector has been doing in the pension arena."

Lawmakers face two challenges on the pension front: 1) how to pay down a $47 billion-and-growing debt on its pension plans, and 2) containing costs in the future.

For the past couple years, many Republican lawmakers have favored changing the kind of pension plan the state and its public schools offer from a defined-benefit plan to a defined-contribution, or some kind of hybrid system.

They've come up against staunch opposition from labor unions and Democrats. Those groups met the actuarial analysis of the Tobash plan with skepticism, saying it would require a big sacrifice from future hires.

"The issue of retirement security... I think also are going to require a deeper analysis on the part of the members of the General Assembly," said Sen. John Blake (D-Lackawanna).

House Democrats said the projected savings wouldn't come in the short-term, resulting in no relief for state and school district budgets facing steadily rising pension fund contributions. They also said the Tobash plan would fail to "meaningfully" pay down existing pension debt any sooner than is now required.

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