Lawmaker proposes pension approach

| Monday, Sept. 30, 2013, 9:06 p.m.

HARRISBURG — A key Republican lawmaker proposed borrowing $9 billion on Monday as part of an approach to rein in the soaring costs of pensions for nearly 380,000 Pennsylvania teachers and state employees.

Rep. Glen Grell advocates establishing a cash balance retirement plan for newly hired employees that would guarantee an annual return of at least 4 percent.

He would offer financial incentives to employees who agree to certain pension adjustments.

Grell, chairman of the House GOP majority task force on pensions, acknowledged that neither Republican Gov. Tom Corbett nor House leaders have embraced his proposals and said the legislation has yet to be introduced.

“There's much work remaining to be done on this issue,” he said, standing alone on a stage, sandwiched between charts and graphs.

Corbett made pension reform a top legislative priority this year, calling for decisive action to shrink a $41 billion unfunded liability between the state's two major public pension funds.

But his original proposal to reduce benefits of employees foundered amid opposition from unions that said it is unconstitutional. Committees in both houses have since endorsed alternative bills to require newly hired employees to enroll in a 401(k)-style plan, but the debate has been in limbo since lawmakers adjourned for a summer break.

Grell said the revenue and savings produced by his plan would offset most of the unfunded liability during 30 years.

The $9 billion in borrowing would address almost a decade of pension underfunding by previous legislatures and governors, and signal the state's resolve to meet its pension obligations, he said.

The state would cover debt service he estimated at $550 million a year.

Under the proposed cash balance pension plan, hires and taxpayers would share the risk of investing, contributing 7 percent of their pay while employers would chip in an additional 4 percent initially and 5 percent after 15 years of service. Investment returns of more than the guaranteed 4 percent would be split between employee and employer.

Spokesmen for the governor's budget office and the House Republican caucus declined to discuss specific objections to Grell's proposal.

But the Cumberland County lawmaker received a warmer reception from the Pennsylvania State Education Association, the state's largest teacher union, and the Pennsylvania School Boards Association.

“Rep. Grell's ideas represent an interesting new direction, finally moving the conversation away from costly legislation that would create a new 401(k)-type plan and cost taxpayers another $40 billion,” PSEA President Mike Crossey said.

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