Pa. pension, tax bills pass first hurdles

HARRISBURG - Legislators cast key votes Wednesday on two bills that will set the tone for budget negotiations with Gov. Wolf in the coming weeks.

Within hours of each other, the Republican-controlled House approved a property-tax reform measure, while the GOP-dominated Senate passed legislation to rein in the cost of public employee pensions.

Legislative leaders called the votes historic - but the reality is more nuanced.

The bills now swap chambers, with the property-tax measure heading to the Senate for consideration and the pension bill going to the House. And both face uncertain futures.

That did not stop Senate Majority Leader Jake Corman (R., Jefferson) from describing Wednesday's vote on pensions as "a huge day" for the state, and a significant step toward negotiating a budget agreement. "To get this accomplished today is historic," he said.

After several hours of heated debate, the Senate passed by a 28-19 vote a Republican-crafted proposal that seeks to whittle away at the state's ballooning pension debt by changing benefits for future employees and adjusting those marked for current employees. Current retirees would not be affected.

Under the plan, new employees would be placed into a 401(k)-style plan, while also being required to contribute 3 percent of their salaries into a cash balance plan, on which they would earn interest (capped annually at 4 percent).

Current employees would have to pay more into the system if they wanted to keep their benefits unchanged; if not, their pension benefit for any future earnings would be calculated using a less-generous formula.

Democrats in the chamber called the plan financially risky and likely unconstitutional. They contend it would effectively put the state in a position of breaking a contract - a pension promise - with its employees.

They also railed at the speed with which the bill moved through the chamber. The proposal was unveiled late last week, although details about it were known before that.

"We think that violates our whole notion as a general assembly, who we are as a chamber," said Senate Minority Leader Jay Costa (D., Allegheny).

Sen. Vincent Hughes of Philadelphia argued that the legislation would drive people into poverty.

"It is the destruction of the middle class of the commonwealth of Pennsylvania," said Hughes, the ranking Democrat on the Appropriations Committee. "It is the final nail of the corporate crew. The sucking sound of the dollar right out of average working people putting dollars aside for their savings."

Wolf, a Democrat, has said repeatedly he does not support the bill. He is advocating a different approach, which includes borrowing $3 billion to help pay down the state's pension debt.

Earlier in the day, the governor told reporters that though he had not studied the full proposal, "from what I have seen, it doesn't seem like it meets my standards of being fair to employees."

Wolf was more magnanimous when asked about the House's GOP-drafted property-tax relief plan, which calls for hiking the personal income and sales tax to reduce property taxes throughout the state. The bill passed the chamber in a 105-86 vote, with Democrats also voting to approve it.

Although it differs from the proposed tax changes he has made a cornerstone of his budget plan, Wolf applauded the bipartisan effort to pass "the first substantive property-tax reform bill that I've seen in my lifetime."

He added: "I look at this as the beginning of a fruitful conversation, and a bipartisan one."