Budget Update: Pension Reform Setback, Stalemate Continues

Tom-Corbett-upsetGovernor Corbett received a setback today in his effort to push for pension reform.

The Gov. shocked many political observers, not to mention PA citizens, when he declined to sign the budget that was passed by the state legislature on Monday.

Corbett identified the lack of any type of pension reform in the budget as his reason for reluctance to the sign the measure. At the moment, he has not ruled in or out eventually signing the budget into law.

In fact, the Governor’s pronouncement was about as measured as a statement announcing a shutdown could be. He even congratulated the Republican legislature for passing the budget on-time and without tax increases (although not signing the document makes the former accomplishment a rather moot point).

His hopes of a major initiative, though, were dashed earlier today.

The State House voted to send the main pension reform bill to the House Human Services Committee where it is expected to wither and die. The committee is chaired by Rep. Gene DiGirolamo (R-Bucks), one of 15 Republicans who voted with the 92-member Democratic caucus to punt the bill away.

We’ll have more updates as events progress.

12 Responses

  1. @ Isaac L.:

    You failed to “listen” to Guzzardi; “philosophy” and rhetoric aside, pensions are simply too costly.

  2. Delco – Thank you – I always heard a lot about these pension issues but then I finally took the time to understand them and realized that it’s a lot of bluster. They’re somewhat complex so most people only know what they hear from sound bites. I was quite surprised when I got down to the facts.

    Mr. Guzzardi – a fair question, but the ballooning costs aren’t inherent to pensions themselves, they’re a symptom of a decade of recklessness. We borrowed the money, we are constitutionally obligated to pay it back either way so we might as well keep the long-term cost savings of having a pension over a 401(a) while we’re at it. Arguments against public-sector pensions seem to break down to a simple philosophical disagreement (one that I don’t find consistent with conservative, cost-cutting philosophy considering the cost savings a well-run pension system offer). They save money over the long-run and are better for workers – it’s a win-win. Governments are also in a uniquely beneficial position because their debt is sovereign and their existence isn’t subject to the whims of the markets, so they’re better able to weather long-term fluctuations. Basically, pensions are pound smart and these pension “reform” proposals are pound foolish and penny foolish.

  3. If Governor Corbett’s talking points are correct, and I think they are, then the question is not whether government/union pensions are a good idea or a bad idea but whether they are an affordable idea. Taxpayers are forced by government to fund government/union pensions. How much are taxpayers willing and able to pay? What is the consequence of forcing taxpayers to fund government/unions at ever escalating rates?

    So far I have not seen Corbett’s Talking Points refuted, or even addressed. When is too much enough?

    Corbett Talking Points “Within four years, our pension liabilities will be twice the size of our annual state budget.

    For every new dollar of revenue generated in Pennsylvania, $.60 cents goes to new pension liabilities.

    If we do not act to address the pension crisis, the Commonwealth faces a potential credit downgrade, driving borrowing costs higher, and further straining future budgets.
    Pension costs are also a major cost driver for local school districts and has led to increasing property taxes.”

  4. Thanks, Isaac L. That is the best takedown of the Corbett/GOP Pension bomb myth I have heard. Instead of demonizing the state workers who have earned these pensions, allow the plans in place to work and live up to our obligations…works for me!

  5. Worm – you clearly don’t understand the pensions situation. Act 120 of 2010 is a bipartisan reform that set the Commonwealth back on a sustainable path after the irresponsible Ridge-era expansions and state contribution holidays. Pensions are a good deal for taxpayers because they’re part of an overall compensation package that allows the state to pay lower salaries than equivalent (same education, experience, etc.) private sector positions because the markets make up around 70 percent of pension gains. The problem was that the employees were the only ones making 100 percent of their required contributions while the state continually borrowed money from the pensions when they were over 100 percent funded (as much as 120 percent funded in 2002, even after the down market). This resulted in the pensions becoming underfunded, especially after the 2008 economic disaster, and the funds had to become more liquid to continue paying benefits, which meant they had to shift to investments with much lower returns, exacerbating the problem.

    Act 120 slashed benefits for future employees by at least 20 percent and would get us on track if the state didn’t keep cutting back the required payments. The Corbett administration continued running up the credit card bill to give away over $2.1 billion in corporate tax breaks and subsidies and the payments are coming due. Clearly, this is not a pensions problem; it’s a revenue problem, or at least a priorities problem, especially given Pennsylvania’s relatively low taxes, having the lowest income tax of any state that collects one.

    Switching to a 401(a) program would result in the taxpayers being responsible for the entire unfunded liability instead of making the 18 percent-ish contributions and letting the market do the heavy lifting, getting us back on track over the next 30 years. The state constitution specifically prohibits the impairment of contracts, so eliminating benefits for current employees who’ve earned them is unconstitutional. We have a plan; we just have to follow it and it will work. The Corbett plans wouldn’t actually save the Commonwealth anymore money than Act 120, but would be devastating to the future workforce, making it harder to attract the kind of talent we need in our schools, police barracks, and government offices.

  6. Worm-
    Corbett’s proposal for pension is not reform. He wants to lower employer contribution and raise employee contribution. That doesn’t solve anything, but just puts a minor band-aid on his current budget, and the expense of the employees who haven’t done anything wrong.

    Corbett has failed to raise sufficient revenue to operate Pennsylvania and cover it’s obligations. Cutting taxes doesn’t raise revenue.

  7. Stop letting your political leanings get in the way. The Governor is the ONLY person in the Capitol acting responsibly on the pension issue at this point.

    Hate to rain on the liberal utopia you hope to create under a possible Wolf Administration, but w/ an unfunded liability of well over $40billion, there aren’t enough Pennsylvanians or businesses to tax to fund schools, entitlement programs, workforce development, public safety, higher ed, and healthcare at the levels you would like AND continue our unsustainable defined benefit plan for public employees.

    Somebody has to say what no one wants to hear, and on this issue, Governor Corbett is the ONLY ONE exhibiting the leadership to do so.

  8. Yes, Governor Corbett is doing the bidding of two libertarians who have never donated to him, and whose political organizations have constantly criticized him for being insufficiently conservative.

    At least PAIndy’s bizarre rants name people with some connection to the governor.

  9. Who the hell are the koch brothers?

    Really? Thanks Harry Reid. Go back to your DNC talking points about some strawman.

    Anyway, I’m loving this. I have the popcorn.

  10. Can’t we hold the Gubernatorial election today? This clown is intent on devastating the state – should be sued for malpractice. Doing the Koch Brothers’ bidding to the very end…

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