That sucking sound you hear is the state government’s two huge pension plans vacuuming up vast sums of taxpayers’ money.
But, since the General Assembly created the unfolding mess, it is no hurry to resolve it in the taxpayers’ favor.
Gov. Tom Wolf has proposed a reform plan to mitigate the bleeding that includes some good ideas. But it doesn’t go far enough, just as the General Assembly didn’t go far enough with its own half-measure in 2010. The state’s contributions to pension plans for state and school district employees will increase by more than $400 million this year. On top of that, it will increase by more than $500 million next year and then mostly level off at those high contributions for the next three decades.
Lawmakers created the disaster in 2001. They give themselves a 50 percent pension increase and cut in school and state employees for 25 percent. They made it retroactive, increased benefits for people who already had retired, and then decided that the plans’ investment earnings were so great that the state government and school districts could skip payments to the plan for a few years. The result is that the commonwealth has the second most underfunded pension plans in the nation, behind New Jersey, a $50 billion liability for which taxpayers are on the hook.
Wolf wants to diminish that liability in several ways. He would vastly reduce the amount that the plans pay in fees to its investment firms. That alone would save $200 million a year that could be rolled back into the plans. And the governor would exploit current low interest rates by borrowing $3 billion through a bond issue, then use investment proceeds from that money to make annual payments into the plans, diminishing the impact on the state budget. (The governor would pay off the bond through $180 million a year in extra profits that he believes the state liquor monopoly can produce.)
Those proposals would help and should be adopted. But they should not be the only reform. Lawmakers unduly enriched themselves with the outlandish pension gambit in 2001. And in 2010, they passed a tepid reform that addresses only the benefits of new employees — thus ensuring massive costs for generations. Any serious reform plan must restore sensible benefit levels to the system. The state can’t roll back benefits accrued at the higher rates established in 2001, but it can roll back the rates going forward. It should do so, thus ensuring that taxpayers and new workers aren’t the only ones bearing responsibility for reform.