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Corbett: Pension reform 'a taxpayer issue'

| Thursday, June 26, 2014, 2:41 p.m.

HARRISBURG — Taxpayers may pay more in property tax if state lawmakers don't act to reform state pension systems burdened by a $47 billion funding shortfall, Gov. Tom Corbett said Thursday.

“I don't want to see real estate taxes go up,” Corbett said.

But he predicted that school districts might have to raise taxes to keep scraping together money for teachers' retirement benefits because pension systems for teachers and state workers face the combined shortfall.

The deficit prompted credit rating agencies Standard and Poor's and Moody's to threaten to downgrade Pennsylvania's credit rating, he said.

“It's a taxpayer issue because if the rating goes down, then borrowing becomes more expensive,” Corbett said.

Republicans in the House and Senate have sponsored proposals that would overhaul retirement benefits for new employees. Corbett said he wants legislators to act on these measures to show they're serious about fixing the deficit.

But the bills have received an icy welcome from the other side of the aisle. House Democratic spokesman Bill Patton said a change in the pension system for new employees would not address underfunded pensions in the short term.

“Republican focus on pensions is part of an anti-worker mindset of many Republicans,” Patton said.

Rep. Joe Markosek, D-Monroeville, said focusing on pension reform avoids the real issue: the estimated $1.3 billion shortfall in revenue the state faces this year.

“The governor's call for pension reform is nothing more than a diversionary tactic to distract the public from his budget crisis,” said Markosek, the minority chairman of the House Appropriations Committee.

Corbett insists the state can't afford to keep paying for the system as it is structured.

“This is not a partisan issue; this is a taxpayer issue,” he said.

Legislative leaders in recent weeks delayed a vote on a proposal to open a hybrid plan for new employees instead of the current defined benefits plan. The proposal by Rep. Mike Tobash, R-Schuylkill, would use a formula similar to the existing plan's to calculate benefits on earnings up to $50,000 a year. Salary above that would transfer to a 401(k)-style plan. After 25 years of service, all employees would switch to the 401(k)-style plan.

Supporters of the idea cite long-term savings it promises the state.

An actuarial report commissioned by the Public Employee Retirement Commission estimated that Tobash's proposal would save the state $11 billion to $15 billion over 30 years. It predicted the plan would hit new employees hard.

“For new employees, the loss of retirement security is greater than the value of the cost-savings to the commonwealth,” the report said.

A separate pension proposal, sponsored by Sen. Mike Brubaker, R-Lancaster, is under discussion in the Senate. Though it would not change benefits for current employees, all new hires would be covered under a defined contribution plan similar to a 401(k) instead of the defined benefit plan or a hybrid plan.

Labor groups balk at the idea of closing the defined benefits plan. Kathy Jellison, president of Service Employees International Union Local 668, said retirement benefits are one of the big draws for young workers who enter public service.

“It's going to be harder to recruit new folks,” Jellison said. “It's just a bad deal all around.”

Sen. Kim Ward, R-Hempfield, does not want to go home at the end of the session this month without seeing movement on pension reform.

“I don't want to leave here with just a budget,” she said. “I don't think I could go home and look at the people who voted for me.”

Gideon Bradshaw is an intern with the Pennsylvania Legislative Correspondents Association. Reach him at bradshawgideon@gmail.com.

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