Pen­sions be­com­ing un­sus­tain­able

North Penn Life - - Opinion -

Gov. Tom Cor­bett isn’t the only of­fi­cial call­ing for pen­sion re­form. Cor­bett calls the state’s $41 bil­lion un­der­fund­ing prob­lem a “tape­worm” de­vour­ing the bud­get. Illi­nois, which faces $98 bil­lion in un­funded pen­sion li­a­bil­ity, has “Squeezy the Pen­sion Python,” cre­ated by Gov. Pat Quinn, ac­cord­ing to a report in The Philadel­phia Inquirer.

The is­sue many of­fi­cials are call­ing a cri­sis, how­ever, has not caught the imag­i­na­tion of ei­ther the gen­eral pub­lic or the leg­is­la­tors who must vote on the re­forms be­ing pro­posed.

A month af­ter Cor­bett in­tro­duced pen­sion re­form as part of his bud­get pro­posal, leg­is­la­tors re­mains cool to the idea.

Cor­bett and Bud­get Sec­re­tary Charles Zogby have de­tailed the cri­sis to the Leg­is­la­ture, me­dia groups and ed­i­to­rial writ­ers. The fis­cal cri­sis has been laid bare be­fore tax­pay­ers and vot­ers, but lit­tle out­rage or even con­cern has arisen in re­sponse.

School dis­tricts in the state are fac­ing a jump in re­tire­ment con­tri­bu­tions from 12.36 per­cent this year to 16.93 per­cent next year. In the Up­per Dublin School District, for ex­am­ple, where salaries are be­ing re­duced for 2013-14 in or­der to bal­ance the bud­get, the pen­sion con­tri­bu­tion will amount to $7 mil­lion, $1.9 mil­lion of which is due to the in­creased rate. The state pro­vides half the pen­sion con­tri­bu­tion, with the district paying the other half, which trans­lates to an ad­di­tional $950,000 cost for the district.

De­spite the pres­sure be­ing put on school dis­tricts, the only out­cry has come from union lead­ers poised to bat­tle in court if Cor­bett’s plan ad­vances. The ques­tion for the unions, as dif­fi­cult as it may be, is whether lay­offs and de­mo­tions, as those pro­posed in Up­per Dublin, are in the best in­ter­ests of their mem­bers.

The gov­er­nor’s pro­posal would tran­si­tion state pen­sions for new em­ploy­ees from de­fined ben­e­fit to de­fined con­tri­bu­tion, mean­ing pub­lic em­ploy­ees would join much of the pri­vate sec­tor in trust­ing their re­tire­ments to a 401(k) style plan. The gov­er­nor would also freeze ben­e­fits for cur­rent em­ploy­ees and re­duc­ing the mul­ti­plier used to cal­cu­late pen­sion amounts, two mea­sures op­posed by union lead­ers.

Cor­bett’s plan is pro­jected to save $12 bil­lion in fu­ture pen­sion ben­e­fits, mak­ing a dent in the $41 bil­lion li­a­bil­ity. That’s if the Leg­is­la­ture ap­proves it, which is not a cer­tainty con­sid­er­ing the luke­warm re­sponse in Harrisburg. Then there’s the le­gal chal­lenges promised by unions.

Although most vot­ers in Penn­syl­va­nia don’t seem out­raged about this sce­nario, more should be.

The pen­sion re­forms pro­posed re­flect eco­nomic re­al­i­ties that hit the pri­vate sec­tor a long time ago. Em­ploy­ers have frozen pen­sions, re­duced 401(k) con­tri­bu­tions, cut salaries and elim­i­nated sim­i­lar ben­e­fits with no le­gal re­course.

Pen­sion re­form is not in­tended to rob teach­ers or pub­lic em­ploy­ees of the ben­e­fit they’ve earned. But the eco­nomic re­al­ity is that the sys­tem is cur­rently too gen­er­ous to be sus­tained for the fu­ture. That’s not go­ing to hap­pen un­til tax­pay­ers/vot­ers un­der­stand the se­ri­ous­ness of this sit­u­a­tion and de­mand re­form from leg­is­la­tors.

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