Saturday, July 26, 2014
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Pa.'s shrunken pension reform

Will elected officials stop their own gravy train?

Pa.'s shrunken pension reform

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The radical state pension changes the Republicans who control state government in Pennsylvania have been calling for, in the face of a $50 billion shortfall between what the state has promised future retirees and what it has actually collected and invested to pay them with, aren't quite dead. But they sure have shrunken.

The bill formerly backed by Gov. Corbett, Sen. Mike Brubaker (R-Lancaster) and others -- to freeze the current retirement systems, turn future hires over to worker-funded 401(k)-type plans (with taxpayer co-payments), and tighten pension calculations so there aren't as many people retiring in the six-figure range -- is off the agenda, at least as far as most state workers' (SERS) and school employees' (PSERS) members are concerned.

Good thing: the state Public Employee Retirement Commission and the state's bean-counting consultant, HayGroup of Arlignton, Va., warned the bill, instead of saving taxpayers money, would have cost the state an estimated $6 billion over the next  35 years or so, because it would keep the plans' fat deficits unfunded, rob them of future payroll deductions and taxpayer subsidies, and force them to invest more conservatively, at lower rates of return.

But a corner of the bill survives, in mostly symbolic form, as a Brubaker proposal to strip future governors, General Assembly members, other elected statewide officials and judges of their guaranteed pensions, and instead give them a 401(k)-style plan, where taxpayers would supply partial matching funds for officials' retirement payroll deductions.

PERC and Hay say this bill would save the people something north of $600 million between now and 2052, by knocking all those high-paid elected officials out of the system. Still just a fraction of what's needed.

Corbett approves: "The Governor says he'd be the first in on a 'defined-contribution' plan for elected officials," his spokesman Jay Pagni tells me. That bill cleared the Senate last week and is headed for what looks like a frostier reception in the state House. 

Meanwhile, the relatively moderate proposal from Rep. Mike Tobash (R., Pottsville) that I wrote about last month -- to cap pensions for future hires at $50,000 a year, delay those pensions until age 65 (or 60 for state troopers), and give anyone who can't live on that much a 401(k)-type payroll-deduction and partial-matching-dollars plan to invest on their own -- has come back from the Endless Mountains of committee re-assignment, where state House leaders had sent it, and is now on schedule for a possible House vote this fall.

My Harrisburg colleague Amy Worden tells me the odds of a decisive vote are pretty light, as the fall election campaign revs up. But, as with the chopped-off Brubaker bill, "the Governor supports Tobash as a step in the right direction," Pagni adds.

Joseph N. DiStefano
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About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
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