Pennsylvania lawmakers must return for real pension reform
Between now and the end of the month, hammering out a state budget will be the top priority in Harrisburg. But after the budget battles are over, the Legislature should return to a fiscal threat facing nearly every state — underfunded public employee pensions.
Some state lawmakers might claim they did pension reform earlier this year, with the passage of House Bill 2497. But anyone suggesting that that was true pension form is ill-informed or not being honest. A column written by George Hale, a political science professor at Kutztown University of Pennsylvania, and printed in a Pittsburgh newspaper earlier this year, called H.B. 2497 “fake pension reform.”
Hale and other critics note that what state lawmakers called pension reform was just a short-term fix that makes long-term problems worse. Hale called the changes in H.B. 2497 “largely cosmetic” and noted they impacted only newly hired state employees. He also explained that the changes will mean “much higher contributions (to the pension funds) in later years,” which means higher total costs to state taxpayers.
A typical Harrisburg solution: Talk about reform, but mostly implement short-term fixes that create larger long-term problems. Pennsylvania lawmakers should return to pension reform, but this time make the kind of tough decisions being made in other states.
According to a June 15 article in the New York Times, eight states have this year required state workers to contribute more toward their pensions, often much more.
While the high-profile, partisan budget battle in Wisconsin labeled the Republican governor an enemy of public employee unions, other tough pension changes are being proposed by Democratic governors, including Andrew Cuomo in New York. Cuomo wants all future state workers to pay 6 percent of their salaries toward their pensions, double the current level.
The Times reported that 12 states imposed higher pension contributions for state employees in 2010. In Illinois, with one of the worst state budget crises in the country, a legislative committee recently voted to require state workers to contribute 17 percent of their pay to their pensions, or get lower benefits.
These are acknowledgments that, in most states, public pensions promised too much and were underfunded for too long. Public support for tax hikes to boost pension funds is eroded by reports of state retirees getting $100,000-plus pensions and of government workers retiring in their early 50s — while most people will receive much less and work years longer.
The public has finally had enough of the inequity between public and private pensions.
To be fair, in Pennsylvania, not all of the pension problems were caused by public employee unions. This state, like most others, has underfunded its pension obligations — and recent stock market declines have hurt investment returns.
The most outrageous factor in Pennsylvania occurred in 2001 when state lawmakers quietly pulled a pension grab, giving themselves a 50 percent pension raise. When public employee unions got wind of that greedy move, they protested, causing lawmakers to approve a 25 percent pension increase for the majority of other state workers, along with public school teachers. The 2001 pension grab had far greater financial implications than the notorious 2005 pay-grab vote that famously took place at 2 a.m. and included no public notice or debate.
Pennsylvania’s budget crisis is serious. But the public pension crisis is a bigger problem because of its long-term implications and the costs it could impose on younger generations, and on the state’s competitiveness, if taxes are raised to fund pensions.
Real pension reform, not fake reform, is what’s needed in Pennsylvania. Gov. Tom Corbett should step forward with a tough plan, joining governors in other states, calling for cost-saving changes, higher employee contributions, pension caps, later retirement ages — and ultimately a conversion of state employees’ pension programs to a 401(k)-style defined-contribution benefit.
Beleaguered taxpayers want real reform, not some gimmicks that paper over problems, kick them down the road, and leave bigger problems for our children and grandchildren.