Friday, July 31, 2015

State pension bill: Rescue or bailout?

An IOM editorial in the Daily News:

State pension bill: Rescue or bailout?

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Tom Corbett hasn´t been speaking this way about the pension bill. (GENE J. PUSKAR / Associated Press)
Tom Corbett hasn't been speaking this way about the pension bill. (GENE J. PUSKAR / Associated Press)

An IOM editorial in the Daily News:

How do you solve a problem like pensions? That's the question state lawmakers tried to grapple with Monday, when they overwhelmingly passed a bill aimed at helping the state's troubled pension system.

The troubles in the system began in 2001, when the Legislature made overly generous promises and benefits increases without a strategy for covering costs. That was enough of a problem, but the 2007 stock market meltdown caused huge investment losses to the pension fund.

Taxpayers foot the bill for those losses. And between losses and increases in benefits, taxpayers were set for a staggering increase in pension payments - from $1.1 billion this year to $6.5 billion in 2014.

The recent legislation, on its way to Gov. Rendell's desk for his almost certain signature, attempted to find a solution. It changes the accounting rules to protect taxpayers from huge spikes in payments to cover losses, basically by rewriting and lengthening the schedule for payments and the amount of time allowed to recover from the losses. It also requires increased contributions from employees, and a new less-generous benefit for new hires.

Supporters of the bill have hailed it as a "rescue" of the retirement system for state workers.

Opponents labeled it as "generational theft" - because it pushes payments into the future - and a "union bailout," primarily because it retains the unions' defined-benefit pensions.

As we see it, the truth lies somewhere in the middle; the bill walks a fine line between reducing taxpayer burdens and not shortchanging public employees who have certain expectations about their retirement.

If you think that's an easy task, just look at the open warfare in New Jersey between Gov. Chris Christie and the teachers' union. He has tried to eliminate the defined benefit for workers, and been routinely shouted down in meetings. We might admire Christie's blunt style, but his boisterous bluster is making actual compromise difficult - especially with New Jersey's Democrat-controlled Legislature.

It's not often that Pennsylvania lawmakers outshine their counterparts in other states, but the pension bill could turn out to be one example of meaningful bipartisanship.

Still, the pension bill doesn't solve everything. Lawmakers have thus far refused to have a real discussion about the idea of moving from a traditional defined-benefit pension to a 401(k), which would be more in line with the private sector. That's bound to be political napalm, but it should be something under discussion.

There's one big beneficiary of the pension bill who has been absent from the debate: Tom Corbett. The incoming governor has promised to balance the state budget without raising taxes. Without this pension compromise, that would have certainly led to draconian cuts across the board. (Not that coping with the state's $5 billion budget deficit and the ballooning pension payments will be pretty.)

Given Christie's push for slashing public pensions, Corbett's silence on this bill makes us wonder about just how much he holds Christie up as a role model.

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