You have to admire Gov. Tom Corbett for his stick-to-it-iveness.
Despite the General Assembly’s bipartisan rejection of his latest proposal to cut pensions a further 40 percent, and the conclusion of independent pension experts that his plan won’t save the state money, the governor has spent several weeks traveling across Pennsylvania trying to sell voters on his plan. Here are some reasons the governor is struggling to make the sale.
State education cuts and unaffordable corporate tax cuts, not pensions, are the main drivers of school property tax increases.
Corbett has tried to build support for his plan by claiming that pension benefits, which average $25,000 per year, are to blame for rising property taxes. His whistle-stop tour from Bucks to Beaver counties, however, doesn’t change the fact that the first budget after the governor took office cut nearly $1 billion from K-12 classroom education, resulting in tens of thousands of teacher layoffs and increased class sizes.
Three years later, more than half of these cuts are still in place — more than half in the lowest-income districts. To limit the damage to the quality of education, many school districts now have no choice but to raise property taxes.
Meanwhile, the budgets on the governor’s watch have wasted about $3 billion each year — $12 billion total — on recently enacted corporate tax breaks that failed to improve Pennsylvania’s job growth. This lost revenue would have been more than enough to fund both our schools and our pensions.
Corbett has yet to propose a pension plan that would actually save money.
The governor’s proposal this year — a “hybrid” plan that is part traditional pension, part 401(k)-type accounts — doesn’t save any money in the current budget cycle, even with benefit cuts for many career teachers and other public servants of 40 percent or more.
Long term, the governor’s hybrid proposal would increase costs in several ways, according to the pension experts (known as actuaries) required to analyze new pension plans before the legislature acts.
Cost No. 1: the 401(k)-type part of the hybrid plan would have lower returns and higher financial management fees than the existing, professionally managed, pensions.
Cost No. 2: Gradually removing new employees from the existing pensions, as the hybrid plan would, could diminish investment returns of those pensions.
Cost No. 3: The benefit cuts in the plan would make it harder to recruit and retain the best talent for our schools and state agencies. This would require raising salaries in the future.
Since the governor’s hybrid plan also provides no savings in the current budget cycle, schools for yet another year will have to do more with less. The absence of short-term savings also means no property tax relief for families.
Many Republican legislators are not sold on Corbett’s plan.
Given the findings of the pension experts, it is not surprising that there is bipartisan skepticism about his hybrid pension proposal. Some of the most knowledgeable Republicans in the legislature on pension issues are the most critical of the plan.
The bottom line on Pennsylvania pensions: After a three-year campaign, the governor has made the case that Pennsylvania needs to take additional steps to address its long-term pension debt. But he hasn’t made the sale that he has a good solution.
His pension proposal would make Pennsylvania’s pension challenges harder to solve. It cuts the benefits of teachers and other public employees while failing to save taxpayers money.
The legislature should stick to its guns on pensions, rejecting so-called “reform” until we have a proposal that benefits taxpayers, provides real relief to school districts, and treats employees fairly.