PA Senate Passes Pension Reform Bill

Member Group : Commonwealth Foundation

For Immediate Release
Commonwealth Foundation
Contact: Cindy Hamill (856) 607-4208

Senate Pension Reform: Sustainable for Taxpayers, Fair to Public Employees
Critical Retirement Bill Heads to the House, Positioned for Budget Discussions

May 13, 2015, HARRISBURG, Pa.—Governor Wolf cannot ignore Pennsylvania’s pension crisis any longer. Today, the state Senate passed legislation to convert a broken retirement system into one that is sustainable for taxpayers and fair to public employees. The pension bill heads to the House, putting the critical fiscal issue front and center for the state budget which is due before July 1st.

Matthew Brouillette, president and CEO of the Commonwealth Foundation, issued the following statement:

"It’s encouraging to see the Senate stand up for the taxpayers of Pennsylvania and against powerful special interests in Harrisburg. After piling up more than $50 billion in pension debt, it’s clear that structural reforms—not temporary or phony remedies—are required to ensure the integrity of government employees’ retirements and stop stealing from our children and grandchildren.

We’ve seen examples from California to Michigan to Illinois of what happens when pension problems go unaddressed. Over just the last six years, pension contributions by Pennsylvania school districts have risen by nearly $2 billion—enough to pay the salaries of 30,000 new teachers. These expenses crowd out classroom spending and spur rising property taxes.

While SB 1 does not address pension debt already accrued, it does establish a predictable system for new employees that cannot be underfunded and is safer from political manipulation.

Public employees should not have to worry if the state will make good on its pension funding promises. That’s why the Senate’s 401(k)-style plan for new employees ensures that workers’ accounts have real dollars that they can take with them to other jobs. No longer will public employees be trapped in an archaic pension system filled with taxpayer-backed IOUs. Senate lawmakers are laudably practicing what they preach by enrolling themselves in this new system.

The ‘transition costs’ argument against converting to such a defined-contribution system—repeated by those who profit from the status quo—is based on flawed investment return assumptions and has been repeatedly debunked by credible pension experts.

Instead of Governor Wolf’s short-sighted scheme to issue ‘pension obligation bonds’—which are akin to paying off your mortgage with a credit card—we hope the House of Representatives will take up and improve upon this historic action by the Pennsylvania Senate.

As the budget debate ramps up in June, pension reform must remain at the top of lawmakers’ and the governor’s priority lists. The status quo is irresponsible and unacceptable."

See Commonwealth Foundation’s pension reform toolkit for more information.
Matthew Brouillette and other Commonwealth Foundation experts are available for comment today. Please contact Cindy Hamill at (856) 607-4208 to schedule an interview.

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