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Pennsylvania public employees pension plans under attack

02.26.13

MARCH 2013, LEHIGH VALLEY Edition of The Union News

Pennsylvania public employees pension plans under attack

BY PAUL TUCKER
THEUNIONNEWSABE@AOL.COM

REGION, February 15th- The Pennsylvania public pension cost issue is heating-up in Harrisburg with Republican Governor Tom Corbett announcing he wants to reduce the pension cost to free up money and put it back into programs he has slashed in previous state budgets.

Governor Corbett’s Budget Secretary, Charles Zogby, released a report of the long-term sustainability of the Pennsylvania Public School Employees’ Retirement System and the Pennsylvania State Employees’ retirement System.

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.

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. 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.

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.

The PSEA released a study of their own which indicated the major contributing factors of the pension crisis was investment losses that were incurred in two recessions within one decade and employer underfunding.

Mr. Corbett has linked the pension cost cuts to restoring funding for education and social programs, a proposal he hopes will get members of the General Assembly to support the pension cuts.

Mr. Crossey emphasized that the Keystone Pension Report vague suggestionsto 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.

The Pennsylvania State Employees’ Retirement System covers more than 100,000 active employees and provides for 100,000 retirees as well as their beneficiaries.

Former Governor Ed Rendell signed Act 120 into law that preserved all benefits now in place for current members however, mandated benefit reductions for future members effective January 1st, 2011. Mr. Corbett was aware of the pension cost problem when he took office in 2012 but he gave tax credits to businesses which has made the problem worse.