Gov. Wolf is scheduled to stand in the capitol rotunda Monday to sign a sweeping pension reform bill. When he does it will be with the understanding that this is only a start; a good start, but nonetheless short of what must be done to stop the system’s $70 billion unfunded liability from crushing state and local budgets.
In a rare show of bipartisanship, the legislature last week gave final passage to a bill that cuts costs by raising participants’ retirement age from 65 to 67. It also gives school and other public workers the option to invest 7.5 percent to 8.25 percent of their salaries into retirement funds, depending on the plan’s quality.
New employees will be limited to participation in a hybrid pension program, which would include both a traditional plan with a guaranteed benefit and a defined contribution plan, like a 401(k), where benefits are tied to investments. That arrangement would transfer some risk from taxpayers to workers, whose retirement savings would drop if the stock market slides.
The plan is expected to save the state $2 billion to $9 billion over 30 years. It moves the state toward a fully funded pension system. Decreasing that debt would stop the state’s pension obligations from crowding out other important commitments, like providing social services and fixing roads.
The mere existence of a bipartisan pension plan is a welcome change from the maddening dysfunction that marred Democrat Wolf’s relationship with the Republican-controlled legislature during his first year in office.
After a horrific nine-months-long budget impasse in 2015, both sides finally realized that taxpayers expected them to do their jobs. Democrats and Republicans began to work together on issues the public clamored for, including legalizing medical marijuana. They also agreed that the opioid crisis should be a higher priority.
That same unity is needed to address politicians’ addiction to making flashy promises with no way of fulfilling them.
The Pew Charitable Trusts, which has done extensive research on the subject, has enthusiastically supported the new pension plan for Pennsylvania. Pew says it reduces costs while ensuring employees will be able to count on their retirement funds. “Our research indicates that this would be one of the most – if not the most – comprehensive and impactful reforms any state has implemented,” said Pew in a letter to the legislature.
Now that the governor and legislature have shown they can work together they need to apply their new spirit of cooperation to upcoming budget talks, which must address the state’s $3 billion deficit.
Wolf apparently is backing away from past requests for an income tax increase. That concession should open the door for Republican legislators to impose a severance tax on their beloved shale gas industry, which has yet to shoulder its fair share of Pennsylvania’s tax burden.