The General Assembly is almost certain to approve some form of public pension reform as part of the annual budget process this year, lawmakers and lobbyists said last week in the wake of Gov. Tom Corbett’s budget address.
The unfunded liability in pension systems covering state workers and public school teachers is growing exponentially, and is becoming a massive drain on the general fund, Corbett emphasized in the speech.
The debt now stands at more than $50 billion, according to the Pennsylvania Public Employee Retirement Commission.
Corbett said Feb. 4 in his budget address that 60 cents of every incoming revenue dollar in the new fiscal year, which begins July 1, will go toward the Public School Employees’ Retirement System and the State Employees’ Retirement System.
“It’s a crisis that will soon be a catastrophe,” Corbett said.
In the short term, Corbett is proposing to reset the state’s $2.1 billion in statutory pension obligations this year. That would leave $440 million in new costs. He’s proposing to cover about half of that with a one-time transfer of cash and investment equity currently sitting in the state’s tobacco settlement fund.
One of the legislature’s leaders on the issue, state Rep. Glen Grell, R-Cumberland, said he wasn’t involved with the development of Corbett’s plan but has started negotiations with his office in the past few days.
“One of the keys is to get to the real cause of the problem and that is the state’s underfunding of the two funds,” Grell said.
To resolve that, Grell is proposing borrowing against the general fund, a move he says can be done without incurring additional debt.
Underfunding is one of three causes of the ballooning debt in the funds, the Public Employee Retirement Commission said in a report. Another cause stems from a 2001 change by the legislature increasing the multiplier for them and state employees, and the third lies with successive years of weak performances in the stock market.
­— John L. Kennedy, for the Law Weekly