JANUARY 2013, Scranton/Wilkes-Barre/Hazleton Edition of The Union News
Pennsylvania teachers pension plan liabilities increasing
BY PAUL TUCKER
REGION, January 5th- A recent report by the National Council on Teacher Quality (NCTQ) estimates teacher pension plans nationwide have almost $325 billion in unfunded liabilities. In Pennsylvania it is estimated there is an unfunded liability of $19.7 billion. The report suggests the pension problem is worse due to unrealistic assumptions and projections about what returns will be made on investments.
The teacher unions and other public sector unions in Pennsylvania are getting ready for another battle with Pennsylvania Republican Governor Tom Corbett and conservatives in the state General Assembly in 2013 when they will attempt to cut retirement benefits.
Mike Crossey, the President of the Pennsylvania State Education Association (PSEA), which represents approximately 190,000 active and retired school teachers and employees in Pennsylvania, reacted to the Keystone Pension Report which was released on December 3rd by Governor Corbett’s budget secretary.
Mr. Crossey noted that the report stated what PSEA has said all along, that the public employees of Pennsylvania and taxpayers did not create the pension problem.
Mike Crossey emphasized that teachers, nurses, and other public employees across the Commonwealth already pay for a significant portion of their pensions, and have made their contributions on time. The pension shortfall was caused by politicans who failed to make their appropriate contributions to the pension system. Many schools districts across Pennsylvania have not made their contributions to the pension system.
“To blame Pennsylvania’s budget problems on debts employers owe to the pension systems is to make a scapegoat of working people who have contributed to their Pensions, year in and year out,” Mr. Crossey stated.
He emphasized that the report’s vague suggestions to change the future retirement benefits of current workers are unconstitutional, unethical, and won’t solve the problem since it would not address the pension debt.
“And in reality, it is Covernor Corbett’s prior budgetary decisions that are the true cause of Pennsylvania’s budget problem. Governor Corbett made a conscious policy decision to provide more than $800 million in corporate tax breaks, including the capital stock and franchise tax and bonus depreciation credit, which cost the state $760 million, more than the projected pension debt owed in 2013-2014 fiscal year.
The National Council on Teacher Quality report notes Pennsylvania’s pension system is 75.1 percent fully funded, better than 28 of the 50 states. The most unfunded is Indiana at 44.3 percent of liabilities.
Some states, including Pennsylvania, have attempted to change the pension system. In 2010 the Pennsylvania legislature passed Act 120, which lowered the amount a pension increases a year of employment from 2.5 percent of pay to 2 percent. Also, the vested time was raised from five years to ten and required most teachers to wait until they are 65 to start receiving pension payments. The new rules apply to newly hired teachers.
Mr. Crossey added that the PSEA and other public employees in Pennsylvania helped pass Act 120 to pay down the debt employers owe the pension systems. “Now, the governor wants to walk away from it and break a promise of retirement security for teachers, nurses, libraians, and public safety workers, in order to honor a no-tax pledge to Grover Norguist,” added Mr. Crossey.
The NCTQ suggest that increasing pension vesting time is the wrong way to go because it restricts teachers moving from one state to another, recommending instead a maximum of three years. The report suggest setting a uniform age, such as 65 years old, for the start of pension payments, making the plan fair to all teachers.