A figure from Governor Tom Corbett’s office estimates state employee pension funds are currently $47 billion short of where they need to be.
Tuesday, Gov. Corbett, flanked by several Republican lawmakers, painted a dire picture for the future if the Legislature doesn’t tackle pension reform this year.
“These pension costs are skyrocketing,” he said. “They’re crowding out the vital programs that fund our roads, our education system, care for our needy, job creation and yes, public safety.”
In a bill introduced in both the House and Senate, Corbett proposes putting all new state employees into a 401(k) style retirement plan, as opposed to the defined benefits system current employees have.
It calls for changing the way future benefits are calculated for current employees to cut costs, and it would also reduce the amount the state is required to contribute to employee pensions to provide short-term budget relief if needed.
But Michael Crossey, president of the Pennsylvania State Education Association said the governor’s bill isn’t necessary.
“The governor says we have a pension crisis. I believe Pennsylvania has a budget crisis,” he said.
In 2010, the Legislature passed Act 120 with bi-partisan support.
Along with reducing benefits and increasing employee contributions, it established increases to the state’s contributions over several years, to slowly pay off the debt it owes to the funds.
“Certainly, they have to make their payments now, but at the same time, it was good for taxpayers because it eventually pays off that huge unfunded liability, rather than kicking that can down the road again,” Crossey said.
Crossey suggest staying the course with Act 120 for pensions and instead finding other revenue streams to deal with the state’s budget crisis.
Among his proposals, reducing tax credits to corporations and putting an extraction tax on natural gas drilling.