COAL TOWNSHIP, PA – Amid the “challenging times” in Harrisburg, there is one issue that stands above all others in terms of its statewide impact.
“The biggest issue is pensions. Period,” state Sen. John Gordner (R-27) said Tuesday in addressing the monthly luncheon of the Brush Valley Regional Chamber of Commerce, held at SCI-Coal Township.
“It’s gobbling up every dollar,” added state Rep. Kurt Masser (R-107).
The state has had to come up with $600 million more in funding just to cover new pension obligations, Gordner said, yet the state’s unfunded pension liability remains some $40 billion. Contributions to the pension system represent the “No. 1 cost driver” for public school districts, Gordner said.
Like Gov. Corbett, Gordner supports a “hybrid plan” proposed by Rep. Mike Tobash, R-125 (Pottsville). Under his bill, the first $50,000 in annual income earned by a new state government or school district employee would be calculated for retirement purposes under the defined-benefit plan traditionally given to public employees. Annual income above the $50,000 threshold for new employees would be calculated under the defined-contribution plan similar to 401(k) style investments common in the private sector.
The proposal would not affect current retirees or current employees – including those “in this room,” Gordner said in a nod to state correctional workers.
The proposal could save an estimated $11 billion in pension costs during the next three decades, according to the Public Employees Retirement Commission. But the Keystone Research Center, a labor-oriented think tank, has challenged the idea of potential savings because it could lower investment returns for the pension systems over time because it shrinks contributions from new employees.
Tobash’s proposal is currently stalled. In both chambers, it didn’t make floor votes.
What the Senate did do, Gordner said Wednesday in further discussing the issue, was unanimously pass a bill that would apply a 401k-style pension to legislators. It would go into effect on Jan. 1 and apply to newly elected or re-elected lawmakers. Using himself as an example, Gordner wouldn’t lose the pension money earned thus far under the current defined-benefits plan, but earnings going forward would be part of a 401k.
After failing to pass something more comprehensive, “Senate Republican leadership felt we had to make a statement,” he said, noting people are asking “what about the legislators?” when it comes to pension reform.
The bill was sent to the House, which didn’t act in the short time left before the end of the session. Asked about its prospects for movement this fall, Gordner said, “I don’t know.”
Masser said he’s aware of that measure and would vote in favor should it reach the House floor. But he noted making such a change for Pennsylvania’s 253 legislators is tiny in savings compared to changes for tens of thousands of state workers.
Gordner reiterated that he did not vote in favor of increasing lawmakers’ pensions by 50 percent in 2001, a move that many point to as the start of the current crisis. The no vote was a permanent decision as it applies to Gordner’s pension rate.
Masser generally supports Tobash’s plan, although he’s offered an amendment that would prevent state police, corrections officers and those who work for the game and fish and boat commissions from being lumped in with all others in terms of retirement age parameters. Citing the argument of fellow House members, Masser asked if a trooper, for example, would want a 64 year old to “have his back” as opposed to someone 30 years old.
He said it’s disappointing that legislators couldn’t even agree on Tobash’s plan when it’s merely “step one” toward more significant pension reform.
Also, while lawmakers enjoy summer recess, “I feel we should be down there now working on this issue,” Masser told the chamber.
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