Pension overhaul bill hits the homestretch
HARRISBURG — Republican lawmakers’ long-sought legislation to overhaul pension benefits for Pennsylvania state government and public school employees received what could be its final changes Tuesday before it becomes law.
One change to the bill would help lawmakers keep their existing pension benefit.
Several amendments in the House State Government Committee followed the Senate’s passage last week of a compromise bill that would create a mandatory 401(k)-style benefit for future hires, combined with a traditional pension benefit that is halved.
The committee vote was party line, with Republicans framing it as a step toward limiting the potential to roll up more pension debt, even if there is no guarantee that the proposed new plan ultimately will be less costly.
“That’s where we’re shifting risk to say, ‘You spend a little bit more now to set up the other plan, but it shifts the risk so you don’t have these unfunded liabilities to the same degree that you have them now in the future,”’ House State Government Committee Chairman Daryl Metcalfe said.
About one-third of the states already administer a mandatory or optional 401(k)-style retirement benefit for employees, according to the National Association of State Retirement Administrators.
Critics said the plan envisioned by the bill would be administratively complex and maintain the potential for underfunding by not shifting to a full-blown 401(k)-style benefit. Democrats, who had opposed a move away from the traditional pension benefit plan, criticized the bill as committing no money to pay down the state’s approximately $55 billion pension debt.
State pension officials had estimated that the Senate’s legislation, before House changes, would save about $2.5 billion over 30 years on payments totaling nearly $200 billion. Some of those savings stem from proposed new limits on current employee benefits. But those savings could be wiped out if labor unions follow through on threats to sue over the constitutionality of reducing benefits for current employees.
Gov. Tom Wolf has agreed to sign the bill as part of a wider budget agreement that guarantees a record spending increase for public schools.
Sen. Pat Browne, who authored the pension legislation in a compromise with Wolf’s office, said the Senate would have to discuss whether to accept the House’s changes.