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Pension reform, transportation should be Harrisburg priorities

State lawmakers face a weekend deadline for a state budget, privatization of the state store system, transportation funding and pension reform. Such a heavy workload would be daunting for even the most effective legislature — and that’s not Harrisburg’s reputation.

All four items are high priorities for Gov. Tom Corbett and Republican lawmakers.

Of these priorities, ending the state monopoly on liquor and wine sales can be put off until another time. The privatization effort has become overly complicated by trying to please too many special interest groups.

The state store system should be replaced by a private system, as happened decades ago in most other states. But reforming alcohol sales in Pennsylvania is not nearly as critical as pension reform and boosting transportation funding.

Pennsylvania can live with an antiquated system of wine and spirit sales. But this state cannot thrive with inadequate funding for transportation infrastructure — and it cannot survive without serious pension reform.

The latest proposals to increase funding for state highways, bridges and mass transit represent progress, but they are each about $1 billion-a-year short of the spending level recommended by experts.

Regarding the pension crisis, the pension funds for state employees and public school teachers are underfunded by more than $40 billion and pose a threat to the state budget and taxpayers in the form of larger property tax bills caused by local school districts having to make higher payments to the teachers’ pension plan.

Taxpayers will be hit no matter what is done. Given that, voters and taxpayers should remember that part of the current pension crisis was created in 2001 when state lawmakers voted themselves a 50 percent pension increase. After that vote, about which the public knew little, other state employees demanded their own pension hike. Under that pressure, lawmakers passed a 25 percent pension increase for other state employees, including public school teachers.

So, a significant part, but certainly not all, of today’s pension crisis is the result of state lawmakers grabbing what was then a pension fund surplus.

The financial impact of the 2001 pension grab on taxpayers should be negated by requiring beneficiaries to contribute more to their pension plan. The additional payments should be calculated to equal the unwarranted benefits increase approved in 2001.

Once that’s done, more changes will be necessary.

The current proposals to shift only future state employees into a 401(k)-style program, also known as a defined-benefits plan, are inadequate. Current employees should be part of any pension reform plan. They should be required to feel some of the pension reform pain because the only way to ease the pain for average taxpayers is to have beneficiaries pay more or receive less-costly benefits.

States and cities across the country are facing similar pension crises. In California last year, voters in San Jose and San Diego approved by wide margins plans that would reduce benefits for current employees while also enrolling new workers in 401(k)-type plans. In San Jose, the voter-supported plan would let city employees keep their current pension benefits, but only if they paid more into the system — up to 16 percent of their pay. If they didn’t agree to pay more, the employee would receive less-generous benefits, meaning lower pension payments, a higher retirement age and smaller cost-of-living adjustments.

These are the hard choices that legislative leaders, governors and mayors across the country will be forced to make to create sustainable pension systems.

Additional reforms are necessary, such as caps on maximum pension benefits and changes to stop abuses of the system, such as workers boosting overtime in the final years of work to get higher pension payments.

Reform opponents cannot blame a Republic governor or GOP lawmakers for these reform ideas. Similar plans have been pushed by Democratic governors Jerry Brown of California and Pat Quinn of Illinois. Mayor Rahm Emanuel of Chicago, another Democrat, has also pushed tough pension reform ideas.

Pension reform is not about politics, it’s about arithmetic. The current systems are simply unsustainable. Beneficiaries have to pay more and possibly accept less-generous benefits. Without serious pension reform states and cities will see taxpayers crushed and spending on everything from education and highways to police and fire protection cut because of pension costs.

Corbett and state lawmakers need to be bold — and honest — when it comes to pension reform.It will take political courage, but it’s necessary.

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