Our opinion: What we should do
There’s no way to avoid pain in addressing Pennsylvania’s pension crisis, so Gov. Tom Corbett should push for big changes to protect taxpayers in the future.
And to get him moving, Pennsylvanians need to keep the pressure on him and legislators.
Pennsylvania’s State Employees’ Retirement System and Public School Employees’ Retirement System are underfunded by $41 billion based on current regulations, which will require increasingly higher taxpayer contributions for the coming decades to fix.
Some of that we will have to pay. Taxpayers are legally responsible to pay the pensions that have been earned.
But the state can lighten its burden by changing the system for pension benefits that have not yet been earned.
The state’s pension systems are defined benefit. Based on years of service, average final salary and a multiplier, recipients are guaranteed to get a certain amount. If investment income isn’t enough to cover the cost, the employer must pick up the tab.
These types of pension plans are largely vanishing from the private sector and are being replaced by defined contribution plans. In these plans, the amount being contributed into the plan is fixed, and the retirement benefit varies based on the return on investment.
Pennsylvania should make that change at least for future employees and potentially for current employees after a certain date. Workers won’t like the change, but it’s the fairest system for taxpayers.
Judges should be subject to the same changes, as should legislators, if members of the General Assembly remain a part of the pension system.
If senators and representatives are wary of taking the heat for such a change, draft it so it becomes a public referendum and allow the voters of Pennsylvania to decide. We think most would favor the switch.
And if the Legislature and governor approve the changes, and state courts block them, then voters will know what they need to do at the next retention elections.
Retirement age and the contributions of both employee and employers will have to be determined with an eye toward fairness to all. We don’t want to see an influx of poverty-stricken retirees, but we don’t want to see taxpayers being sent to the poor house because of the cost of providing state pensions.
In addition, employer contributions should be set by statute and only changed with a two-thirds vote of both chambers of the General Assembly.
That can avoid legislators reducing contributions to free up money for other things.
When times are flush, the continued contributions by employees and employers will build a surplus that can be used during the next economic downturn when we hope to avoid additional pain for retirees or taxpayers.
The Keystone State needs a big change, and we call on the governor to lead the charge for overhauling the pension systems with an eye to provide fairness and stability for all.
With the vocal support of Pennsylvanians, it can be accomplished.