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Pennsylvania pension reforms badly needed, panel says

| Monday, Jan. 28, 2013, 9:44 p.m.

The commission charged with reviewing Pennsylvania's public pension systems issued a “serious call to action” on pension reform in a 264-page report it released on Monday.

The report, which was issued a week before Gov. Tom Corbett's annual budget proposal, presented a variety of options to finance unfunded obligations and concluded that “the only unacceptable option is to do nothing” with pension benefits for more than 800,000 eligible public employees and retirees.

Warning that taxpayer costs for state and school pension contributions are scheduled to rise from $1.2 billion this year to $3.2 billion in 2017-18, James McAneny, director of the Public Employees Retirement Commission, or PERC, said the commission steered clear of political considerations. Options the commission laid out include:

• Seeking voluntary benefit reductions in pensions that are protected by law in return for maintaining retiree health care benefits that lack strong protections.

• Seeking increased employee contributions.

• Rolling back prior retiree cost-of-living adjustments.

• Raising taxes.

• Privatizing government assets to generate additional income.

• Selling pension bonds.

McAneny warned there is no single fix. He said Pennsylvania faces a two-pronged dilemma: finding a way to cover its growing unfunded obligations after years of short-changing pensions, then redefining what a public pension should be.

Corbett has called pension obligations a “Pac-Man” that is gnawing away at the state budget.

“Much like PERC, the administration realizes that the issues surrounding the pension system are complex and require a combination of many different solutions. We know the $41 billion in unfunded liability, coupled with increasing contribution costs, make it very difficult for the commonwealth to fund core programs and services,” said Corbett spokeswoman Christine Cronkright.

Reform can't come too soon for school districts, which must underwrite their employee pension contributions out of local tax revenues, said Pennsylvania School Boards Association spokesman Steve Robinson.

In the Pine Richland School District, for instance, budget documents show pension costs will increase to $4.7 million next year, or more than three times the $1.33 million the district paid in 2009-10.

Carnegie Mellon University economist Robert Strauss, who has studied the pension issue for a decade, said the state can't afford to maintain the status quo.

“The PERC report is a useful first step in preparing taxpayers and public employees for the collision that is happening around the country between pension promises made by departed politicians and an aging labor force that expects these promises, no matter how unrealistic, to be kept.”

Debra Erdley is a staff writer for Trib Total Media. She can be reached at 412-320-7996 or derdley@tribweb.com.

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