Our Opinion: Public pension tapeworm gets hungrier by the day in Pa. G

ov. Tom Corbett likens Pennsylvania’s public pension problem to a tapeworm, a parasite that devours new revenue as fast as an improving economy can create it.

“We hDve WR FRnsLder everyWhLnJ,” Ln fixLnJ the problem; it’s the “tapeworm of the budget,” he told a Digital First Media editorial board meeting.

Corbett called pension reform the one thing he seeks to accomplish this year. Property tax reform, he says, will have to wait.

Corbett’s call to action is not without merit. The public pension drain has escalated to a crisis in Pennsylvania with nearly $700 billion in year-over-year cost growth robbing state coffers of 62 percent of any new revenue.

In recent years, both the state employees fund (SERS) and public school employees fund (PSERS) have accrued unfunded liability amounting to billions of dollars a year, according to Charles Zogby, secretary of the budget. The funds’ current unfunded liability is $41 billion, not including future shortfalls.

Just to get the funds back on good footing would require a tax increase of $9,000 on every household in Pennsylvania, Zogby said.

The story of how Pennsylvania’s public pensions got to this point can be explained, but not without pain. It’s a sWRry RI JenerRus EenefiW LnFreDses ZLWhRuW FRrreSRndLnJ changes to contributions. It’s a timeline of “kicking the can down the road,” as Zogby puts it, intentionally underfunding the systems and pushing the liability into the future. In 2001, the iegislature moved to enhance memEer EenefiWs Ey LnFreDsLnJ Whe PuOWLSOLer WhDW FDOFuODWes pension amounts. In 2002, employer contributions from school districts and government were capped. In 2003, Act 40 was passed to restrain future growth in employer contributions.

And, throughout the time, investment growth was nil, sending the funds into a downward spiral.

UnOLke 401(.) Rr SrLvDWe LnvesWPenW Iunds, D defined EenefiW SensLRn SODn PDLnWDLns D OLDELOLWy Ln SDyRuW nR matter what happens to the fund’s investments. While SERS and PSERS fell in value, liabilities grew. And the tapeworm grew, too.

While the path that brought us here is obvious, the way out is more clouded.

7he reIRrP flRDWed PRsW RIWen Ls PRvLnJ DZDy IrRP D defined EenefiW SODn WR defined FRnWrLEuWLRn, D SrRSRsDO that was part of a 2010 pension reform package which did nRW JR IDr enRuJh. ZRJEy sDys sWDWe RIfiFLDOs Dre ORRkLnJ closely at reforms that have been tried in other states, inFOudLnJ FhDnJes Ln EenefiW FDOFuODWLRns, suFh Ds FDSSLnJ Whe sDODry Rr rROOLnJ EDFk Whe PRdLfier.

Corbett says a proposal will be part of his budget plan IRr WhLs yeDr, DOWhRuJh he DdPLWs hLs RIfiFe Ls dRZn WR DERuW WZR Zeeks WR fiJure RuW Whe sSeFLfiFs. HLs RnOy hLnW to the editors’ group was that adjustments to the multiplier could make an important difference.

BRWh RIfiFLDOs sWressed FhDnJes hDve WR WDke LnWR FRnsideration what people have already earned and what they are counting on. Current retirees have to feel secure their pensions won’t be affected, they said.

HRZever, ZhDW Whey dRn’W sDy Ls hRZ Whey SODn WR FRnvince state employees and the powerful state teachers union that change has to happen.

“The taxpayers get it,” Zogby said. The people of Pennsylvania know this is a crisis. But for pension reform to work, the state needs to get the unions and groups representing public employees on board, as well as the lawmakers.

One way to start might be to enlist the ideas and help of WhRse JrRuSs Ln ZrLWLnJ Whe reIRrPs. GeW Euy-Ln firsW Dnd soften the sell.

Corbett has made his emphasis on pension reform clear to the public. It’s time now to get down to brass tacks and fiJure RuW D SODn WhDW nRW RnOy ZLOO ZRrk EuW DOsR WhDW ZLOO have the needed support.

Time is of the essence. That tapeworm gets hungrier by the day.