In Pennsylvania, state senate leaders want to stop guaranteeing pensions for future state workers and teachers. Here's why:
The Pennsylvania State Employees' Retirement System and Public School Employees' Retirement System are proud achievements of 20th Century state government.
Like similar plans in other states, SERS and PSERS have enabled hundreds of thousands of hardworking teachers, police officers, prison guards and social workers to retire on up to 70% of their maximum yearly wages, keeping them in their homes and cars and restaurants and off the streets -- while also guaranteeing private-sector-executive-style six-figure annual payments. plus medical benefits, to ex-judges, Penn State sports coaches, assistant school district administrators with extra degrees and four-word titles, double-dipping General Assembly members, and other privileged members of the bipartisan public-employee elite.
Public pensions are like paper currencies: They work well when managed by principled fiscally responsible people, if you can find them, but are vulnerable to political decisions to boost spending, cut income, and leave the program unsustainable for future generations.
Pennsylvania is a prime offender: Under former Gov. Tom Ridge (R), the state in 2001 boosted pensions even as it cut taxpayer support. (Public workers also pay more than 6% of their paychecks into the fund, but it's not enough to pay all the future checks.)
To replace lost state revenues, the plans hired hundreds of expensive private-sector money managers, some of them political donors, to jack up assets.
That hasn't worked. The result is a multibillion-dollar and growing shortfall between what the pension plans have amassed and what they're going to have to pay hundreds of thousands of surprisingly healthy retirees for decades to come; along with rapidly increasing demands on taxpayers that are driving local school taxes up, outraging citizens.
Gov. Ed Rendell (D) very late in his administration was prevailed upon to trim state pension costs by raising the collection age to 65 and doubling the minimum service period to 10 years.
And yet the gap widens, and pensions are forcing state and local tax spending higher. So now the Republicans who run the State Senate, led by Sen. Dominic Pileggi, R-Delco, say they are introducing legislation to kill the guaranteed-pension system, effective for future state and school employees after this year, and replace it with a private-sector-style, 401(k)/403(b)-type program where it's up to amateurs (retirees) to pick stocks and funds and tighten their belts when the market goes south. Though their own pensions and those of current constituents will be safe. More here.