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Pennsylvania House passes pension reform

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Thursday, June 17, 2010
 

The state House on Wednesday passed by an overwhelming margin a bill to cap state and local payments to Pennsylvania's two large public pension plans, defer costs and reduce benefits for new hires and incoming lawmakers.

The bill, awaiting action in the Senate, would reduce a looming spike in taxpayer payments to the state employee and teacher pension funds by a maneuver akin to refinancing a mortgage for a longer period of time. A second provision would slice benefits for new employees and lawmakers.

"I think it is a significant first step in the process of dealing with pension reform," said Senate Majority Leader Dominic Pileggi, R-Delaware County, whose staff was reviewing the bill.

The House bill that passed 192-6 would not cut benefits to current employees, sitting lawmakers and judges.

Johnna Pro, a spokeswoman for House Appropriations Committee Chairman Dwight Evans, D-Philadelphia, said the state constitution bars any reduction in benefits for judges.

Experts estimate increased government contributions to the two pension plans that come due in two years -- barring legislative action -- would boost property taxes on average by more than $500 per homeowner. Overall annual tax-funded payments would increase about fourfold.

Pileggi cautioned the bill's cost could be an issue with the Senate. He said the plan to refinance obligations over 30 years carries a $52 billion price that is offset only partially by reductions for new hires. Experts estimated those reductions would save the state $25 billion over 30 years, leaving taxpayers with $27 billion in additional costs.

The House bill's provisions to cap payments for the immediate future and defer higher costs mirror proposals by Gov. Ed Rendell in his budget address.

The bill would reverse many benefit increases the Legislature approved earlier this decade when lawmakers granted themselves a 50 percent pension boost and extended a 25 percent increase to state and school employees.

Benefit reductions would affect state and school employees hired after Jan. 1 and lawmakers who take office after Dec. 1. Benefits would be calculated on a lower scale; the retirement age would increase; vesting for full membership in pension plans would rise from 5 to 10 years; and members would be prohibited from withdrawing their contributions, plus earned interest upon retirement.

The leaders of the state's two largest teachers unions, the Pennsylvania State Education Association and AFT Pennsylvania, support the bill.

"Although we would have preferred not to have any benefit reductions, we believe this amendment will help solve the pension funding crisis and offset unprecedented layoffs, furloughs and cuts to academic programs faced by school districts," PSEA President James Testerman said.

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