Corbett: State must address pension issues
With Pennsylvania facing a crisis from spiraling public pension costs, Republican Gov. Tom Corbett on Tuesday outlined potential fixes he will offer to legislative leaders in January before presenting his 2013 state budget.
Corbett told the Tribune-Review, sister paper of The Valley Independent, that options include increasing the state retirement age, which varies by agency, and changing how pension benefits are calculated by not including overtime and adding lower-salaried years into the formula.
Any changes would start with new employees but, if he can get lawmakers to agree, could include workers who haven't put in the 10 years required to become vested in the system.
Making changes won't fix the problem in the short term but the state cannot afford to postpone action any longer, Corbett said. As pension costs rise — state payments are due to increase by $511 million next year — other items in the budget will get squeezed.
“Everything is being somewhat driven by what the effect of the pension is,” Corbett said. “People need to know why this is an issue.”
The Budget Office projects a $41 billion unfunded liability for the pension systems that include teachers and state workers. Trying to cut pension costs would pit Corbett against public-sector unions, which are among the state's most influential interest groups. Corbett, however, said the first hurdle is the Republican-controlled General Assembly.
Asked whether he plans to confront labor groups more directly in the next two years, Corbett said: “We are going to work and see what we can get through the Legislature. That's my answer.”
The spokesman for House Republicans said Corbett should have met with lawmakers before making public his concern about pension costs.
“I wish he would talk to the leaders before he goes to the press with it,” said House GOP spokesman Steve Miskin.
The Governor's office issued a recent report citing “staggering” pension costs that more than doubled in the past two years. Pensions for state and school employees cost taxpayers $1.5 billion this year and will rise to $2.2 billion in 2013 and $5.16 billion in 2019-20, Budget Secretary Charles Zogby said.
“We've already made significant changes to the pension system in 2010,” said Sen. Jay Costa, D-Forest Hills. Those include increased payments and retirement ages.
Corbett should allow those changes to have an effect, said Richard Bloomingdale, president of the Pennsylvania AFL-CIO, who called the debate a “phony crisis.”
State leaders caused a pension funding shortfall during the past 12 years, when a series of laws increased benefits while decreasing funding, Costa said.
Pennsylvania State Education Association spokesman Wythe Keever compared that to someone who “owned a credit card and didn't make payments on it for 12 years.” Cutting up the card won't eliminate the debt, said Keever.
Keever said Corbett could satisfy the pension liability by increasing taxes on corporations. Corbett said tax hikes are out of the question. If costs don't come down, money would have to come from education and welfare spending, he said — two of the largest line items in the general fund.
The Fraternal Order of Police, which endorsed Corbett's 2010 campaign, would oppose proposals to cut benefits, said state FOP president Les Neri. Police retire earlier than most public employees and don't have as much time to build a nest egg, said Neri, whose 40,000-member organization has 6,000 people in the state pension system. Raising the retirement age would be a mistake, he said.
“A violent criminal in his 20s or early 30s being pursued by a 58-year-old, gray-haired police officer — I don't think that's what we have in mind when we're talking about public safety,” Neri said.
Corbett did not reject the idea of floating bonds to cushion the financial impact, though he did not embrace the idea.
Rather than asking legislative leaders to help with a plan, Corbett should devise one and present it to the General Assembly, said Sam DeMarco, a conservative activist and president of the Moon group Veterans & Patriots United.
“He's going to sit down and try to gauge their opinion on what they believe they can get done from a political perspective, yet nowhere here is a solution presented,” DeMarco said.
Senate Majority Leader Dominic Pillegi, R-Delaware County, sponsored Sen. Pat Browne's bill to transfer new employees to a direct contribution plan.
“We plan to introduce that bill again in the new session and will work with Gov. Corbett, House leaders, and (Democrats) to implement a plan that addresses all of the pension issues,” said Pileggi's spokesman, Erik Arneson.