Our opinion: Corbett’s challenge

Gov. Tom Corbett had three major objectives when he took office for his first term.

Two of the three, the privatization of liquor and wine sales and expansion of beer sales and the operation of the Pennsylvania Lottery are dead in the water, the latter virtually resting on the bottom.

The third, finding a solution to the looming state pension system crisis, has yet to be seriously considered.

That is about to change.

By all estimates – and in this respect Democrats haven’t really reacted in opposition – Pennsylvania is facing a $600 million shortfall in the short-term and billions of dollars in the long term if nothing is done to rein in the existing public pension system.

The problem is fraught with potential political hazards.

State employees represent a significant pool of voters, and the great majority of them are members of highly politically armed unions. Of the 79,522 total state employees, only a little more than 13,000 are non-union. Add to those numbers the 187,000 public school employees who are members of the Pennsylvania State Education Association, which has already started lobbying against changes in teacher pension plans before they are even introduced.

From what Corbett has been hinting prior to his budget proposal in the next week, he will begin the change with a switch to a 401(k)-type program for new employees. That alpha-numeric designator is actually a section in the federal tax code that provides for contributory retirement savings plans that rely on open market investments like stock and bond mutual funds. Those programs have been common in the private sector for some time.

Although the PSEA has warned its members that 401(k)s are risky – as those who watched their accounts nose-dive in the Great Recession of 2009, can attest – that transition is likely to be politically more palatable than the second, more nebulous step: adjusting the payouts for those current employees covered by the state’s existing defined benefit plan.

It is important to remember that a union contract is still a contract in every sense of the word, an agreement between labor and management that provides a specific return for specific work. Changing the rules of that contract in the middle of the game isn’t impossible, but will require some very careful alliance building across the aisles of the legislature.

Mr. Corbett hasn’t had a lot of luck with the General Assembly on his privatization gambits, even within his own party. The pension issue is crucial for Corbett, but it’s also crucial for Pennsylvania taxpayers.

While the fine details of his proposals aren’t yet known for sure, we do know for sure than something must be done to put the brakes on this runaway train.