Governor Corbett set to announce major overhaul of pension system
Forty-four billion dollars in debt and now the Governor and Republican lawmakers want to make changes to Pennsylvania’s pension system. Governor Tom Corbett is promising a major announcement today regarding his ideas to fix the system.
Most economists and lawmakers agree on one point when it comes to pension reform, Pennsylvania’s system can’t survive without some sort of change. A gap of over $40 billion is estimated over the next six to 10 years and changes have to be made. The Governor is expected to lay out his plans for change today which will set the stage for a fight in the General Assembly.
Governor Corbett has previously recommended several changes to the current system including changing the state from a defined benefit system to a 401k style system for new employees. This would put Pennsylvania more in line with the private sector.
The Governor has also recommended a half point reduction to the multiplier used to determine retirement payout. That means, if you retire today and have a multiplier of 2.5, it would drop to 2. Finally, the Governor is proposing to limit the growth in state payments to the system to provide a little short-term budget relief. Republicans say the time for change is now, just kicking the can down the road will provide more problems.
“We’ve got to seriously start looking at this problem which is huge and is one that is going to eat us alive for a decade or two if we don’t start doing something about it,” said Representative Chris Ross, (R) Chester County on Comcast Newsmakers.
Opponents of the changes say the cost of changing the system over to a 401k style program would bury the current system. The problem, if new employees don’t pay into the pension system there will be less money to pay out resulting in ballooning costs.
Any changes would have to get the approval from the General Assembly. However, a lot is riding on these changes. The 2013/2014 budget depends on these changes to the tune of about $200 million in program funding.
Opponents vow to challenge these pension reform changes in court.