Harrisburg Happenings: Pension Reform
Budget talks are entering their final days, and pension reform debates rage on.
As budget talks are entering the final days, one of the hot-button issues being debated in the legislature is Gov. Corbett's Pension Reform plan. As you may be aware, legislation for pension reform has been introduced in both the Senate and House.
I have received thousands upon thousands of emails, letters, phone calls, and postcards from constituents addressing this issue. An overwhelming majority of those correspondences have expressed positions against pension reform.
So, what exactly started this problem? There are two public pension systems in the Commonwealth: the Public School Employees' Retirement System (PSERS) and the State Employees' Retirement System (SERS). These pensions are funded by a combination of employer and employee contributions, as well as returns on investments in the stock market. Poor returns on those investments have contributed greatly to the funds' debt. In addition, for nearly a decade, the state and local school districts have underfunded the pension systems. All of this adds up to an unfunded liability for PSERS and SERS to the tune of $41 billion.
As a result of the governor's plan to address this multi-billion dollar unfunded liability gap, HB 1350 and SB 922 have been introduced in the legislature. While it would not change current retiree pensions, it would automatically enroll new employees in a 401(k) plan, and reduce the multiplier used to calculate benefits for current employees. Just as recently as June 19th, SB 922 was approved by the Senate Finance Committee with a vote of 6-5. Next, the bill will be up for a vote in the Senate Appropriations Committee, followed by a vote of all Senate members.
Recent actuarial studies show that changing from a defined benefit plan to a 401 (k)-style plan actually increases debt significantly. It is estimated the governor's pension plan would cost the taxpayers an additional $40 billion. For more facts regarding this plan, you can visit my website, http://www.senatorwiley.com.
Gov. Corbett's sweeping systemic changes are not the solution to this problem.
In 2010, the legislature responded to the growing problem of the underfunded pension systems by enacting Act 120. The approval of this act made changes to the PSERS and SERS by updating the actuarial methodology of the funds, managing the contributions made by the state, school districts and employees, and reducing the benefits provided to new members of the two systems.
This is the responsible solution.
We must allow Act 120 some time to do what it was intended to do. If we give this law the proper time it needs to work, we would resolve the unfunded liability issue without putting benefits for members in jeopardy.
The bottom line is the Commonwealth has made a promise, an obligation, to thousands of individuals. It's an obligation that men, women and their families are basing their futures on. It is not their fault that the state has this unfunded liability, therefore, the burden should not be on those hard working men and women to repair the damage that has been done.
To learn more about the pension reform legislation, you can visit www.legis.state.pa.us.
As always, if you have any questions, comments or concerns regarding this, or any other state-related issue, please do not hesitate to contact me at (814) 453-2515 or by email at email@example.com. You can also find me on the web at www.senatorwiley.com as well as Facebook and Twitter.