Surplus may offer Pa. pension relief

HARRISBURG - Smaller-than-expected payrolls for many school districts have left a surplus of state funds that could help ease Pennsylvania's public pension woes and undercut legislative support in the first test of Gov. Corbett's pension-reform agenda.

The state reimburses school districts for an average of 56 percent of their payrolls. If payrolls shrink, so do the payments.

In the year that ended June 30, $69 million of the state appropriation for school districts had not been spent. That money was earmarked for pension reimbursements, and the trend of shrinking payrolls appears to be continuing this year, according to the Public School Employees' Retirement System (PSERS), the statewide school employee pension fund.

So lawmakers could have an extra $140 million to spend as they scrutinize competing demands for scarce dollars in the state budget for the year that starts July 1, rough estimates by PSERS indicated. System officials cautioned Thursday that the amount of any surplus this year could vary according to payroll growth during the next three months.

Some legislators want to plow any such surplus back into the state's share of pension costs instead of refinancing that obligation. Corbett has proposed refinancing to free up $175 million to help balance the 2013-14 budget and reduce the short-term cost to taxpayers. Many lawmakers are reluctant to revisit that strategy so soon after a similar refinancing in 2010.

Tapping the reimbursement surplus would provide the bulk of the savings from Corbett's proposal with much less impact on other spending priorities or paying down debt, making it a politically attractive alternative to the only component of the governor's plan that requires action this year.

"If that's determined to be real money, I think you'll see people coalesce around that," said Steve Miskin, spokesman for the House GOP majority.

Word of the surplus also has spurred discussion within organizations with an interest in the outcome of the pension debate.

"It's encouraging news and, if there were little reason for lawmakers to support Corbett's pension plan before, there's even less reason to do so now," said Wythe Keever of the Pennsylvania State Education Association, the state's largest teachers' union.

Steve Robinson, spokesman for the Pennsylvania School Boards Association, said the windfall might become an excuse for legislative inaction on pension reforms.

"Now is not the time to let up on any reform that may take place this year," he said.

Corbett's plan is designed to reduce the cost of the state's two major public pension funds - PSERS and the State Employees Retirement System - by $12 billion over 30 years. Those savings would be achieved largely by reducing the future benefits of more than 370,000 current school and state employees.

The systems' combined unfunded liability stands at $41 billion.

Corbett's pension proposal, which has yet to be introduced as legislation, has drawn criticism from unions that have vowed to challenge its constitutionality and has received a generally cool reception from legislators.