HARRISBURG — Gov. Tom Corbett’s plan to slash $12 billion from the future pension benefits of current public employees is dead in the Republican-controlled state Senate after a key committee voted unanimously Wednesday to strip it from legislation.
Instead, the Senate Finance Committee, in a 6-5 vote with an all-Republican majority, advanced just one element of Corbett’s far-reaching proposals to overhaul the state public pension system. That provision would shift most future state and public school employees into a 401K-style retirement plan and eventually whittle down the state’s traditional pension benefit plan to a fraction of the more than 800,000 retired and state workers and public school employees currently in them.
Corbett’s plan to reduce the future benefits of current employees by $12 billion over 30 years ran into an immediate threat of a lawsuit by labor unions and opposition in the Republican-controlled Legislature over concerns that it would violate a principle of state constitutional law called the “impairment of contracts” doctrine.
Lawyers for Corbett, a Republican, had maintained that the concept was untested in the courts and believed it would be found constitutional.
Corbett’s proposals to overhaul the public pension system were motivated by the state’s rising annual retirement payments — a spike spurred by lackluster investment returns and inadequate state contributions over the past 12 years.
But even supporters of the bill that passed Wednesday acknowledge that the 401K-style shift will do nothing to address the state’s short-term costs.