Gov. Tom Corbett, who has made pension reform one of the hallmarks in his broader budgeting and economic plan, has supported the companion pension reform bills introduced by fellow Republicans Sen. Mike Brubaker and State Rep. Chris Ross.
Brubaker’s Senate Bill 922 and Ross’ House Bill 1350 supports Corbett’s reform aims, outlined in Corbett’s budget address earlier this year.
The companion legislation would, among other things, keep current employees and retirees in their present retirement plan, protects retirement benefits already accrued and will automatically enroll new state employees into a new contribution plan in 2015. The legislation would also recalculate the future benefits formula for current employees, while limiting the amount an employer’s contribution can be increased to provide short-term budget relief.
“I commend Senator Brubaker and Representative Ross for their leadership in supporting Pennsylvania taxpayers through pension reform and I strongly encourage the legislature to follow suit,” Corbett said via a statement released by his office. “New calculations show that our unfunded liability has risen to a staggering $47 billion. We can no longer ignore our debt to Pennsylvania; we must take action now.”
According to Corbett’s office, it reforms aren’t enacted soon, statewide pensions alone will claim 60 percent of the general fund revenues for FY2013-14, while Brubaker has said that the companion legislation will ensure the sustainability of the pension system now and for the future.
Pension reform has direct implications in the public education realm, as pension payments – along with the slicing of the statewide education budget and the administration’s general lack of movement regarding extra funds sorely needed by the School District of Philadelphia and other distressed districts throughout the state – serves as one of the main contributors to spiraling education costs, and results in the subsequent cuts to the educational services each district provides.
Locally, the district officials have repeated stated that Philadelphia’s school district needs an additional $60 million from the city and $120 million from the state if it is to provide anything above bare-bones, federally-mandated programs and services. City council is presently in the middle of overall budgetary hearings, with Superintendent Dr. William Hite Jr. and School Reform Commission Chairman Pedro Ramos testifying last week about the district’s dire financial situation and once again imploring the city – and state – to act.
While some educational outfits support the plan – including the controversial education reform organization StudentsFirst and its Pennsylvania State Director Ashley DeMauro – Philadelphia Federation of Teachers President Jerry Jordan blasted the legislation as “bad policy,” adding that the reform legislation would lead to a cut in pensions, further delay the increased employer contribution to fund the pension and actually reduces future accrued benefits for employees.
“This is going to establish another payment holiday for the state and school districts, and it will ultimately have to be addressed by a future governor if the law is passed,” said Jordan, adding that what is being debated is actually two retirement plans – one for state employees and one for educators, and that PFT employees contribute to the pension from their checks, and doesn’t come from tax dollars. “Also, and this is very significant, it forces new hires such as new teachers in Philadelphia, to enter into a 401(k) plan. Compared to our plan, that would double the cost to tax payers.”
Jordan also pointed to other pension-related decisions made at the state level that cats a further pall of suspicion over the pension reform legislation.
“We have an issue whereby the state allowed school districts, for close to ten years, to submit reduced pension payments. Those of us who a part of the system and contribute to the system, we’ve never had a reduction in the amount of money we contributed,” Jordan explained, noting that the PFT’s pension kick-in is roughly 7.25 percent. “People retire every year and get a pension, and those of us who are still working, are having pension costs deducted from our checks. But you have to keep funding it, because if you don’t have new [hires] coming in to add new money, the system is going to crash.”
Jordan intimated that the PFT will have meaningful conversations with the legislators who will vote on the reforms prior to June 30 deadline by which the legislation has to vote on Corbett’s budget.
Corbett, Brubaker and Ross contend that more than a third of all Pennsylvania school districts have applied for exceptions to increase property taxes above the school district’s established index. As is, those legislators content that with reform enactment, the public education system in the state would save $1 billion over five years, and roughly $140 million in FY2013-14 alone.
“Pennsylvania’s pension funding situation is quickly reaching a crisis. Something must be done soon to bring these costs into line,” Ross said. “Failure to do so would not only be irresponsible, but would threaten our schools and the state’s ability to meet its obligations.”
Jordan isn’t alone in his criticism of the reform bills, however. On a conference call held immediately after Corbett’s announcement, Pennsylvania ALF-CIO Secretary-Treasurer Frank Snyder said the companion legislation carried a higher price tag than what Corbett has said, doesn’t reduce the unfunded pension liability, can led to lengthy court battles, and, overall, the plan generally hurts Pennsylvania workers more than it helps them.
State Treasurer Rob McCord expanded on Snyder’s feelings, saying that Corbett’s decision wasn’t made with thoughts of the average Pennsylvania worker in mind.
“While this should be about math and about finding a solution, Governor Corbett has made it about politics,” McCord said. “His plan not only ignores the unfunded liability, but will cost taxpayers more, while driving a generation of middle class Pennsylvania seniors toward a less financially secure retirement.”
On that same call, AFSCME Council 33 Executive Director Dave Fillman said public workers throughout the state have already given in to at least one round of concessions to make the pension plan solvent, and that its irresponsible to now try to take that away from them.
“Pennsylvania public workers have contributed to their pension on time, every time, and made substantial sacrifices in 2010 to strengthen their retirement security, and the commonwealth’s fiscal health,” Fillman said. “Based on this new proposal, the governor clearly is more interested in cutting the retirement security of middle class Pennsylvanians rather than achieve meaningful reform.”
Contact staff writer Damon C. Williams at 215-893-5745 or email@example.com.