A missed opportunity to reform Pa. public pensions
The cool reception to new rules for state pensions – and the dose of outrage being directed at hypocritical lawmakers – isn’t surprising.
Lawmakers have only themselves to blame, not that they’re taking responsibility for the pension mess, only for at least trying to fix it.
Faced with a pension choice for the first time this year, most of Pennsylvania’s newly hired state government employees chose a plan that offered at least some traditional guaranteed pension component.
In 2017, they replaced the defined benefit pension plan for tens of thousands of state workers and elected officials with three more financially sustainable options: a 401(k)-style plan and two others combining a 401(k) with some pension benefits.
It had to be done because the state’s pension debt has been growing alarmingly since 2001, when lawmakers expanded the pension formula without paying for it. Unfunded pension debt has surpassed $70 billion.
The revised pension options are mandatory only for new employees and lawmakers who started Jan. 1. Current employees and lawmakers have a choice of sticking with the defined benefit plan, or choosing one of the new plans.
The plan deadlines have arrived, along with boos from employees and a helping of citizen ire. The number of current state employees and lawmakers who opted to forgo the traditional plan and pick a new option falls somewhere between slim and none. Those keeping a death grip their current pensions include most lawmakers who voted to phase out the state’s traditional pension plan.
Just 20 of the 218 lawmakers participating in the state pension plan chose a new option, according to a PennLive analysis .
So, lawmakers broke the system, then sort of fixed it going forward, without addressing the $70 billion unfunded liability. Then most of them hypocritically opted out of participating in the new plans they voted for.
They’re getting the brickbats they deserve, although there’s some nuance involved that must be acknowledged.
As several of them, including the reform’s champion, Senate Majority Leader Jake Corman, explained, in opting to stick with the old plan, he and others are doing what makes financial sense for them as individuals (especially those with decades of service).
“Everybody made a personal decision based on where they are at,” said Senate President Pro Tempore Joe Scarnati, who switched to the 401(k) plan.
Putting personal interest first is human nature and we’d probably do the same. In this case, though, it’s reasonable to expect our elected officials to adopt a higher standard.
Lawmakers brought the current approbation on themselves with their historical penchant for hypocrisy and acting too often out of naked self-interest – most famously by enacting the midnight pay raise of 2005.
It used to be accepted that public service entailed a degree of sacrifice. Now election to the general assembly is accompanied with a level of entitlement that can take your breath away.
To set a new tone and maybe engender some respect, current lawmakers should have chosen one of the new pension options. Political leadership requires walking the talk, setting an example and avoiding optics that undercut it.
State Rep. Seth Grove of York County, who voted for pension reform and also switched to a new plan, identified the problem underlying so much of today’s public policy. He told PennLive: “Harrisburg has a ‘greed’ reputation. The only way to get rid of it is to show you aren’t greedy.”
Besides setting an example, lawmakers also could have gotten the program off to a better start had they been able to explain, credibly, to state employees that choosing the traditional pension comes with a trade-off cost that will have to be paid at some point:
Everyone will continue to see soaring real estate taxes and school programming cutbacks in order to fund the pensions. There will be a greater burden on younger taxpayers as waves of Boomers retire from their state jobs and claim their pensions. Everyone will have to bail out the system when the debt payment comes due.
It’s like driving an inefficient vehicle, knowing you’ll pay more for gas and your children’s children will pay for the environmental damage. At some point the balance tips.
Making this kind of argument also would help lawmakers and policymakers set the stage for the future painful choices we’ll face for refusing to pay up now for other things – like crumbling interstates – that we’ve allowed to fall apart.