Pa. pension reform should roll back 2001 pension grab
While state lawmakers work to complete a budget by the June 30 deadline, debate continues over Gov. Tom Corbett’s pension reform plans to ease taxpayer pain caused by shortfalls in the state’s two big pension plans.
A hearing in Harrisburg this week brought together pension experts, a national organization of state governments and various state officials to examine possible solutions to the looming public employee pension crisis.
Lawmakers and taxpayers in most states across the nation face the same issues. Most governors, Democrats and Republicans, know that current pension programs are unsustainable. Often, they support a combination of higher worker contributions, reduced benefits and higher age limits for retirement.
Corbett’s proposal would, among other things, reduce benefits for current employees while also enrolling new state employees in a defined contribution or 401(k)-type program rather than the traditional defined benefit program that now exists.
Most private sector workers moved from defined benefit programs and into 401(k) programs years ago.
Officials with unions representing state workers claim that Corbett’s proposed changes are unconstitutional and say they plan to challenge any proposed benefit rollbacks in court.
When the topic of constitutionality is raised, the infamous 2001 pension grab quickly comes to mind. In that self-serving action, state lawmakers voted to award themselves a 50-percent pension increase. Soon after lawmakers gave themselves the big pension boost, other state employees asked for their own increase. So, state lawmakers responded by giving most all other state workers and public school teachers a 25-percent pension increase.
Within months of the 2001 pension-grab vote, the stock market took a nose dive as the dot.com bubble burst. Since then, the pension funds have been massively underfunded — and lawmakers’ promises that the extra pension benefits would not “cost taxpayers a dime” turned out to be laughable.
Unions question the constitutionality of Corbett’s pension reform plan. But taxpayers should question the constitutionality of the 2001 pension grab. Like the 2 a.m. pay-raise vote in 2005, which was reversed by lawmakers after public outrage, the 2001 pension grab probably did not follow the letter of the law. Lawmakers slipped it through without proper public discussion.
Any pension reform effort in Pennsylvania should include a rollback of the 2001 pension grab. If the law cannot be reversed, pension beneficiaries should be required to provide increased contributions equal to the additional benefits they will receive from the 2001 action. The increased payments should be calculated to eliminate any burden of the 2001 law on taxpayers.
Even after that is done, Pennsylvania’s public employee pension crisis will not be solved. It will be less severe, but it will remain a challenge.
Based on two voter referendums in California last year, Corbett and other pro-reform officials should see that public support favors rolling back benefits and requiring public employees to contribute more for their generous benefits.
Voters in San Diego and San Jose overwhelmingly approved pension reform plans that require a combination of reduced benefits, increased employee contributions, later retirement ages and shifting workers to 401(k)-style programs.
On the pension crisis, San Jose Mayor Chuck Reed said, “If you explain this to the voters, they’re going to support you. They understand the connection between having to put huge amounts of money into retirement and cutting services to the people.”
Pennsylvanians understand it too. They see that the current system is unsustainable, and they expect elected leaders to make changes.
As the pension debate in Harrisburg continues, Corbett and others pushing for meaningful reforms should continue to explain the issues to the public.
Like the voters in San Jose and San Diego, voters in Pennsylvania will get it — and they will support reform efforts that ease the burden on taxpayers.
