Pennsylvania Senate Majority Leader Jake Corman, R-Benner Township, spoke about the state budget Monday to county business leaders gathered at Toftrees Resort and Conference Center, focusing on pensions, prisons and an aging population — all factors contributing to the state’s nearly $3 billion projected deficit.
Speaking at a Chamber of Business and Industry of Centre County luncheon, Corman told the crowd that, like business owners, state legislators should emphasize the long-term rather than year-by-year patches. Plugging the leaks, he said, isn’t sustainable.
“In Harrisburg, we need to learn from our mistakes,” he said. “There are no triples coming this year in the budget. There are no home runs coming in this year’s budget. But if we can start making these systematic changes … then we’ll have done our jobs and put ourselves in a much better space for the next legislature and the next generation of people.”
Part of the solution could be using state assets to alleviate costs. Gov. Tom Wolf, a Democrat, proposed in February to lease the Pennsylvania Farm Show Complex and Expo Center in Harrisburg, for instance, which would net a projected $200 million in upfront money — a move Corman referred to in the question-and-answer session that followed.
Joe Harteis, a business development specialist with the Blair County Convention Center, agreed with the senator that the core issues need to be addressed before long-term success is achieved. But there’s room to streamline the system further, he added.
“The state has billions of dollars of assets that are sitting idle, and now we’re paying all this interest on pensions,” he said. “Why not pay off some pension debts with leasing assets or things along those lines? They’ve already looked at some of those things, but there’s a lot more.”
The problem has built up over time. In 2001, a 25 percent increase in the pension benefits was signed into law, resulting in lucrative retirement payouts that were unsustainable. State lawmakers papered over the problem by delaying payments, pushing money toward other needs at the time. “It’s like paying off a credit card,” Harteis said. “You have to pay the interest.”
As a consequence, state and public school budgets have few seams left. The pension debt sits at more than $74 billion, according to Barry Shutt, a retired state employee who unveiled a digital ticker of the debt at the Capitol last year.
The noose has only tightened with time.
“That put a lot of stress on the system, which is OK until we started having a recession,” Corman said. “They didn’t think about the future.”
And with the country’s sixth-oldest population, according to the Census Bureau, Pennsylvania is feeling the pressure of paying for sunset benefits. Baby boomers make up the largest demographic in the state, constituting more than a quarter of the population.
“We’ve provided more benefits knowing full well that the baby boomers were going to retire, knowing full well that this demographic change was going to happen,” Corman said. “Instead of preparing for that, we kind of ignored it and now we have a significant population, and a significant set of benefits, that is costing us probably $500, $600 million in new money each year.”
Another idea involves consolidating state agencies, including the multiple departments related to health and human services. Corman said Gov. Wolf’s proposal, which would result in the the second largest state agency in the country, has promise, but requires a thorough review before any move happens.
“It’s trying to find savings, so I don’t want to begrudge him that,” Corman said.
CBICC President and CEO Vern Squier agreed, saying the strategy needs to be determined before moves can be made. But the latter needs to happen, too. “Let’s come to the table, keep looking at options, let’s keep debating those,” he said.
But getting that done remains a challenge, as evidenced by the last two budget standoffs.
“We always have a tough time getting state government to move — it’s sort of like an aircraft carrier, it doesn’t happen real quick,” Corman said. “We need to put in hard work, learn from our mistakes and enjoy success later.”