The Pennsylvania State Employees’ Retirement System board voted today to boost the taxpayer-funded "employer contribution rate" to 16% of state workers' pay, from last year's 11.5%, blowing another hole in the state budget. The pension subsidy will total nearly $1 billion on top of the state's $5.8 billion payroll.
The rate would be even higher -- a surcharge of up to 31% on state paychecks, payable by the state treasury -- without the state law limiting the increase to 4.5 percentage points a year, SERS said in a statement. The rate is expected to jump again, to 20.5% next year.
That's because, despite $25 billion invested in hedge funds, real estate, buyout funds, commodities, and U.S. and foreign stocks and bonds, SERS assets are falling further behind its future liabilities, which SERS estimates at $43 billion. With relatively generous benefits enshrined in a 2001 pension law (though eligibility has been trimmed back in recent years), coupled with years of under-funding under governors from both parties, the plan is now just 59% "funded," down from more than 100% in the early 2000s. That's starting to approach the lower funding level of Philadelphia's pension plan, which covers an older workforce, and reports it's only 48% funded.