Pa. House passes pension increase for oldest retired teachers, state government workers

The Pennsylvania House of Representatives has again passed a bill that would give a cost-of-living raise to roughly 59,000 retired teachers and state employees whose pension benefits have been held flat since 2002.

The issue is one of the many idiosyncrasies of the State Employees Retirement System (SERS) and the Pennsylvania School Employees Retirement Systems (PSERS), the pension funds that provide retirement pay for state government workers and local school district teachers, respectively.

In 2001, Pennsylvania passed Act 9, which gave significant ongoing benefit boosts to current public employees — and which caused significant problems once the increased costs were fully phased in amid the 2008 financial crisis.

Those who had already retired, however, received only a one-time increase to their pension payouts in 2002. For the past 23 years, those retirees have not seen any further increases in their pension checks, even as inflation has reduced the power of a 2002 dollar to about 56 cents today.

There are 37,294 pre-Act 9 retirees who are still alive to receive benefits from PSERS, according to the fund’s actuarial data. Their average age is 84, and their average pension benefit is $19,219 per year.

Benefits and demographics for the 21,596 surviving pre-Act 9 SERS retirees are roughly similar — although those numbers can change quickly between financial reporting periods.

In the 17 months since the House passed the same bill last session, roughly 10,000 pre-Act 9 beneficiaries have died, according to bill author Rep. Steve Malagari, D-Montgomery County.

“That’s 10,000 individuals who didn’t get the help they so deserve because some on the other side of the building here decided not to act,” Malagari said, referencing the Republican-controlled state Senate not fielding the bill before the 2023-24 session expired.

“We love to talk about supporting the aging population and taking care of those who take care of us. Now is the time to do that,” Malagari continued, adding that “inflation does not retire. Neither should our responsibility to those who served the public good.”

Malagari’s bill would increase pension benefits for pre-Act 9 retirees on a sliding scale of between 15% and 24.5%, with those who retired in the year immediately before Act 9 receiving the lowest boost, and those who retired before July 1982 receiving the largest. The cost of these benefits is to be amortized into the pension math over a period of 10 years.

The bill passed Wednesday afternoon on a vote of 131-to-72, with all the chamber’s Democratic majority and a handful of Republicans in favor.

Many GOP members expressed financial concerns, given that the added costs are not included Gov. Josh Shapiro’ s budget proposal.

“This is something that we must work on when we see the big picture of the budget. Governor Shapiro did not present this in his budget proposal,” said Rep. Jesse Topper, R-Bedford, the Republican floor leader, and as such “we have not identified how it will be paid for.”

Topper said his father is a retired teacher who is among the pre-Act 9 retirees in question.

“To say I do not respect the work that he did — either in raising me or the job he did for thousands of students throughout his career — simply based on the fact that I do not know where the money is coming from to pay for this piece of legislation is inaccurate,” Topper said.

Pension fund financing is based on a number of tricky projections — namely how long a given population of retirees will live, how much money working employees will be contributing and what benefit they’ll accrue, and how well the fund’s investments will do.

Based on current estimates, the added benefits would increase the state’s total unfunded pension liability by about $979 million. The first year of rolling this into the pension calculations would increase the 2026-27 fund contributions by $100.5 million for PSERS and another $45.2 million for SERS.

The new benefits would continue to be amortized into the actuarial math over a decade, with the marginal cost in any given year varying depending on actual fund experience. Not all of those costs would be borne by the state budget, given that a little less than half of the PSERS contributions would come from school districts.

Some Republicans also questioned why the state would spend the money on workers who have both a pension and Social Security benefits.

“Why are we giving it to people who already make twice as much as the others? The most impoverished seniors are the ones that only have Social Security, not the ones that have Social Security and a PSERS pension or a SERS pension,” said Rep. Brad Roae, R-Crawford County.

But the fact that federally funded benefits are paltry, Democrats said, shouldn’t be used as an excuse to not increase state-funded benefits for those who need it.

“I think it’s a false choice,” said Rep. Emily Kinkead, D-Allegheny County. “We need to get beyond this rhetoric that says some benefits to some people is an offense to others.”