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Corbett, state lawmakers must accomplish real pension reform

Governors in most states have begun to grapple with the crisis of public employee pensions. This week, Gov. Tom Corbett stepped forward to say he’s serious about dealing with public employee pensions.

Corbett had better be serious — and the state Legislature had better be ready to work on real reform, not more of the gimmicks that have been sold as pension reform in recent years.

In the past three years, according to the National Conference of State Legislatures, 43 states have made changes to pension plans for public employees and teachers. Public employee pensions are straining budgets in most states and many cities.

Part of the problem comes from elected officials overpromising and underfunding when it comes to pensions. Beyond that, public employee unions have used political clout to win increased benefits and sweeten their retirement deals. Seldom has there been any public discussion of the costs.

But those looming costs are behind Corbett’s comment that pension reform cannot wait.

This year’s state budget includes $1.1 billion in payments to public employee pensions. In just four years, that cost jumps to more than $4 billion a year.

Local school districts’ contributions to teachers’ pensions will see equally dramatic spikes.

Taxpayers can no longer fund these pensions as they exist.

Nearly every state is facing a similar crisis. In Pennsylvania, the problem was made worse in 2001 when state lawmakers quietly voted themselves a 50 percent pension increase.

After state lawmakers increased their own pension benefits by 50 percent, other public employees complained. So, instead of reversing the unwarranted pension grab, as they did with the pay-raise vote of 2005, state lawmakers kept their own pension hike and then approved a 25 percent pension increase for most workers, including public school teachers.

To be fair, the 2001 pension grab is not the only reason the state’s pension funds are a crisis, but it’s a big part of the problem.

Now, the impact of the 2001 pension grab is clear. There have been vague warnings, but no significant reform.

The best solution would start by reversing the 2001 pension grab. That might be possible, but it would face legal challenges. Even with such dramatic action, serious problems would remain.

Some states are testing the legality of altering promised pension benefits, and a few municipal bankruptcies have cut promised pension benefits as part of a broad rescue package.

Corbett and the Legislature cannot settle for anything less than real reform. Lawmakers should be willing to roll back their own benefits and those of other state workers. This crisis cannot be fixed with minor adjustments.

Real reform might mean reduced benefits to current enrollees, not just future enrollees. It might mean higher contribution levels and raising retirement ages. Reform might mean capping pensions. It might mean reducing cost-of-living adjustments. Real reform probably means shifting from a defined-benefit plan to a 401(k)-style defined-contribution plan. Reform also means cracking down on gaming the system, as some workers do by boosting overtime in their final years to inflate their pensions.

It’s time for Corbett to demonstrate leadership and insist that this time, pension reform is serious. That means the pensions are put on a sustainable path that does not bankrupt the state or its taxpayers.

In 2011, Rhode Island’s pension reform took the unusual step of trimming benefits for current employees. That should be the model for other states.

Rhode Island’s reform law, passed with bipartisan support, gave the state “police power” to take extraordinary measures to preserve the pension system. Corbett should look to Rhode Island as a model.

State Sen. Jake Corman, R-Centre, spoke out this week, urging serious pension reforms, including possibly reducing the costs of current workers’ future benefits.

State taxpayers will feel the pain of this pension crisis no matter what shape reform takes. But real reform will demand sacrifices from people currently enrolled in the pension programs, and not just shifting the pain to future enrollees as has been done in the past.

Corbett and state lawmakers cannot pretend to reform the state’s pension system. The crisis threatens to bankrupt the state and place an unbearable burden on already-stressed taxpayers. Taxpayers, and voters, will be watching.

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