State Senate GOP moving forward on pension reform
HARRISBURG — With taxpayers' costs soaring $1 billion for public pensions next year, Senate Republicans would lower benefits for current state and school workers, based on future earnings, under a proposal that a union official compared with shredding “hardworking Pennsylvanians' retirement security.”
Senate Majority Leader Jake Corman, R-Centre County, aired the plan Monday with a stern warning: Failure to act on pension reform and relieve those costs on taxpayers could hold up the state budget, which must be passed by June 30.
Corman said legislators would not consider other state revenue during budget talks without pension reform.
“There's no other issue to discuss until we do public pensions,” he said.
Corman believes the state could move from guaranteed pensions to 401(k)-type plans for new employees and limit benefits for current workers moving forward.
“It's just shocking that people want to solve the pension debt problem that the state created by shredding hardworking Pennsylvanians' retirement security,” said David Broderic, a spokesman for the Pennsylvania State Education Association, the state's largest teachers union.
Pension reform legislation — marked as Senate Bill 1 to highlight its importance — will be filed in April and likely voted on in May, Corman said.
“The crisis is here. We need to deal with it,” he said. “We're putting a plan forward. It will give us real savings and reduce our risks for the future.”
Any bill lawmakers might pass would not affect what state employees have earned in pension benefits, Corman said after remarks to a Pennsylvania Press Club luncheon.
Broderic and other union officials question the constitutionality of such a plan, noting it sounds similar to what former Republican Gov. Tom Corbett proposed in 2013. Legislative Republicans turned a cold shoulder to that plan.
“It never saw the light of day,” said Jeffrey Sheridan, spokesman for Democratic Gov. Tom Wolf.
Wolf, visiting Pittsburgh, declined to comment on the Senate proposal, saying he had not reviewed it.
Without substantive pension reform, state taxpayers' costs will soar $724 million and local taxpayers will pay $270 million more, said Jennifer Kocher, Corman's spokeswoman.
Wolf submitted a $30 billion budget proposal with a tax-shifting plan to close what he said is a $2.3 billion budget deficit. The Independent Fiscal Office estimates the budget deficit at $1.5 billion.
Even if the pension change moved through the Republican-controlled Senate and House, it would go to Wolf, who has opposed changing existing state employees' benefits.
Wolf has proposed borrowing $3 billion to fund the pension systems and reducing fees that Pennsylvania's funds pay on Wall Street. The state has separate funds for state workers and school employees.
Corman said a $3 billion debt just “adds to our risk.” Kocher said the borrowing plan would require a change in law, and the bond “is not reform of the system.”
Stephen Herzenberg, an economist for Keystone Research, which has numerous union officials on its board, said he considers the Senate idea unconstitutional.
“It would also make the pension debt problem worse. For those reasons, it can't succeed politically,” Herzenberg said.
The PSEA issued a statement saying the state Constitution “has a very clear prohibition regarding impairment of contracts by the state Legislature.”
Senate Republicans looked at the legality of their proposal and believe it can fly, Corman said. He noted the Legislature changed benefits for state employees in 2001 by increasing them.
“If we can raise them in 2001, what prevents us from going back to where you were? I believe you can do that,” he said.
Herzenberg said actuaries have said 401(k) transition plans would cost $40 billion. New employees would not contribute, and that could affect the funds' growth, he said.
But Kocher said transition costs are debatable, and it depends which actuaries are consulted.
Asked how the proposal could succeed, since it failed to move through the Senate before, Corman said Republicans have 30 votes instead of the 27 they had before. He said Wolf's bond proposal is not “off the table,” but lawmakers won't consider it without major reforms to cut costs.
Brad Bumsted is Trib Total Media's state Capitol reporter. Reach him at 717-787-1405 or email@example.com.