Pa. looks for a way to pay for its pricey pension plan
One of the hard questions facing proposals to reform Pennsylvania's relatively generous but absolutely expensive state and local government pensions is: "Is this safe for people who face bullets and go into burning buildings?"
One of the hard questions facing proposals to reform Pennsylvania's relatively generous but absolutely expensive state and local government pensions is: "Is this safe for people who face bullets and go into burning buildings?"
The woman who phrased it that way, State Rep. Kate Harper (R., Montgomery), has more credibility on the costly topic than most Harrisburg lawmakers.
Back when Gov. Tom Ridge and most Democratic, Republican and public-worker union leaders were collaborating on Pennsylvania's Great Pension Giveaway of 2001 - voting themselves and hundreds of thousands of others billions more in retirement pay and setting aside billions less to pay for it - Harper said no.
"I took a lot of heat," she recalled Oct. 1 before an audience of a dozen fellow legislators, plus town lobbyists and union leaders, at a public meeting in King of Prussia to review reform proposals.
The giveaway won. Result: The underfunded state and school plans are more than $50 billion in the hole; municipal pensions are down $8 billion, more than half of that in Philadelphia. Laws obligating taxpayers to fill those holes so the plans don't run out of money are driving up annual pension spending at many times the rate of inflation, squeezing other programs.
"I was naive and trusting" in that vote 14 years ago, admitted Rep. Chris Ross (R., Chester). He said he learned the hard way that pension professionals "don't always tell you what you really need to know," especially when nobody feels like challenging too-sunny assumptions about investment returns, life expectancy, and risk.
Pennsylvania has more local pension plans, 3,000-plus, than any other state. Hundreds are underfunded, according to the Public Employee Retirement Commission and Auditor General Eugene DePasquale. Even in solvent towns, the cost of paying aging public-service workers is the fastest-rising item in the budget.
Upper Moreland, in Montgomery County, spends one-ninth of its budget on pensions: $2.3 million last year, triple what it paid seven years ago. The bill will rise to $2.9 million next year. Investment profits and the state used to help pay pensions, but state aid has been flat as retiree costs rise and investment profits fall. Republican Township Commissioner Donald Warner told the crowd in King of Prussia: "Without pension reform, Upper Moreland will not be able to continue providing services."
In Easton, pension expenses have multiplied tenfold, to $6 million a year, since 2008. "It's a function of early retirement" and the fact that retired workers, who can leave public service in their 50s, are living into their 80s, said Mayor Sal Panto, a Democrat.
Easton, like Upper Moreland, has tried to curb costs, but officials in both towns say their efforts have been stymied in binding police-pension arbitrations required under a 40-year-old state law. In desperation, Easton last year imposed a nonresident wage tax, hurting efforts to lure jobs. The only cure Panto sees, if reforms fail, is bankruptcy for Pennsylvania's cities and larger townships, as Detroit did to ease pension costs.
Don't blame arbitration, argued Les Neri, the former Tredyffrin police detective who heads the state Fraternal Order of Police. It's a better alternative than letting police strike, the way teachers do, he pointed out.
Relatively few Pennsylvania pensions are in really serious distress, Neri added. He supports provisions such as those in House Bill 32, which would make it easier to combine small-town police pensions and cut costs.
The Pennsylvania Municipal League, along with the Association of Township Supervisors, favors provisions in GOP-backed bills that would make it easier to shift more employees to private-sector plans in which payouts aren't guaranteed. These include Senate Bill 755, which would move more public workers toward private-sector-style, 401(k)-type pensions, and House Bill 316, which would encourage part-guaranteed, part-market-determined "cash balance" plans, which Republicans say also would reduce municipal costs.
Rep. Scott Petri (R., Bucks) noted that his House Bill 974 would encourage towns that are "severely distressed" to sell or lease public assets to raise pension cash. That's what Harrisburg did to reduce pension costs when it faced bankruptcy in the early 2010s.
In Philadelphia, on the other hand, "we have a City Council that walked away from selling the Gas Works, that would have put $400 million into the pension plan," Petri noted. Should the state do more for Philadelphia's system before the city does? (But one-sixth of Philadelphia's budget already goes to pensions.)
Rep. Sheryl Delozier (R., Cumberland) noted that even if the state finds ways to ease pension costs for future hires, towns still need to find scarce dollars to pay unfunded pensions already vested.
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