With all 203 of Pennsylvania’s House members and half of the state’s 50 senators up for re-election, along with the governor and lieutenant governor, it might seem unlikely that an issue could rise above partisan politics in 2014.
But we have one issue that must: the economic impact of state employee pensions.
In a presentation Thursday for the Chamber of Business and Industry of Centre County, state revenue Secretary Dan Meuser said that while the governor’s proposed 2014-15 budget would generate $900 million in new revenue, those gains would be offset by a $700 million increase in pension costs.
“We have a pension crisis,” Meuser told business and community leaders. “There’s no other way to say it.”
That’s not news. Pennsylvania has been dodging this problem for years, “kicking the can down the road,” as Meuser pointed out. Each year we fail to deal with the pension problem, it grows larger and more formidable.
Meuser said the state’s pension costs were at $1.5 billion in 2012-13, and are expected to hit $2.2 billion this fiscal year. But over the next four years, he said, the cost is expected to more than double to $4.7 billion by 2017-18.
Gov. Tom Corbett’s budget office says the state’s pension systems currently have $47 billion more in debt than in assets, and that difference will grow to $65 billion in five years unless something changes.
“It’s not sustainable, not affordable,” Meuser said.
The issue involves two specific funds: The State Employees’ Retirement System and Public School Employees’ Retirement System. As of 2012, the funds had a combined membership of more than 800,000 and paid out about $8 billion each year in retirement benefits, state budget Secretary Charles Zogby said.
In The Keystone Pension Report, Zogby charted the steps that led to this pension predicament:
• In May 2001, the legislature raised pension benefits by 25 percent and lowered the retirement threshold for when beneficiaries became vested in the funds. Four months later, 9/11 sent the nation into an economic slide that lasted much of that decade.
• During the downturn, state government and school districts reduced their payments to the pension funds, leaving the accounts “underfunded” — even as the recession took its toll through weakened investment returns.
By the time the recession was easing, the state’s pension crisis was in full bloom as more education and state government workers hit retirement age.
Zogby noted that Corbett called the pension problem a “tapeworm … eating away at the state budget.”
Meuser touted the governor’s plan for pension reforms, which would postpone some payments and reduce state contributions to retirement savings while pushing more workers toward 401(k) plans.
Critics say the governor’s plan doesn’t go far enough in the short term and hurts state employees in the long term. Those critics should produce valid alternatives and engage in discourse.
The governor faces a Republican primary opponent in his bid to stay in office, while Democrats are lined up hoping for the chance to challenge him in the fall.
But this can’t be a year without action on pensions.
The crisis hurts taxpayers, state employees, schools, businesses, municipalities and county agencies.
All candidates, incumbents and challengers alike, must address the pension situation and offer real solutions for tackling the shortfall without decimating important public programs.
Holding public office is not supposed to be easy.
Such times require leadership, vision and cooperation to find and implement sound solutions — even in an intense election year.
Pension reform may seem like a no-win issue politically.
But the winners would be the people who live — and vote — in Pennsylvania.